Funding Social Security: A Modern Approach

1568 words - 7 pages

Social Security Overview
Social Security is one of America’s most successful government programs, and has helped millions of Americans avoid poverty. Congress passed the Social Security Act in 1935 and the retirement benefits program went into effect on January 1, 1937. Social Security issued its first monthly retirement benefits check to Ida May Fuller of Ludlow, Vermont on January 31, 1940 in the amount of $22.54. Miss Fuller, a Legal Secretary, retired in November 1939. She started collecting benefits at the age 65 and lived to be 100 years old, dying in 1975. Miss Fuller worked for three years under the Social Security program, the accumulated taxes on her salary during those three ...view middle of the document...

The heart of the Social Security system is the retirement program, and this was the original intention of social security and it encompasses today the greatest number of beneficiaries (Tomkiel).
Generally speaking, most employees in private industry, most self-employed persons, and members of the U.S. Armed Forces are covered by Social Security however some groups of people are excluded from social security coverage. Some groups of people are excluded from social security coverage. The main groups excluded are federal employees hired before 1984, and railroad employees, who fall under the Railroad Retirement System. Otherwise the following categories of people can receive Social Security Benefits: 1) A disabled insured worker under the age of 65. 2) A retired insured worker at age 62 or over. 3) The spouse of a retired or disabled worker entitled to benefits who is age 62 or over, or has in care a child under age 16 or over age 16 and disabled who is entitled to benefits on the worker’s Social Security record. 4) The divorced spouse of a fully insured worker who has not yet filed a claim for benefits it both are age 62 or over, were married for at least 10 year, and have been finally divorced for at least two continuous years. 5) The dependent, unmarried child of a retired or disabled worker entitled to benefits, or of a deceased insured worker if the child is under the age of 18, or under age 19 and a full-time elementary or secondary school student, or age 18 or over but under a disability which began before age 22. 6) The surviving spouse including a surviving divorced spouse of a deceased insured worker if the widow(er) is age 60 or over. 7) The disabled surviving spouse including a surviving divorced spouse in some case of a deceased insured worker if the widow(er) is age 50-59 and becomes disabled with a specified period. 8) The surviving spouse including a surviving divorced spouse of a deceased insured worker, regardless of age, if caring for an entitled child of the deceased who is either under age 16 or disabled before age 22. 9) The dependent parents of a deceased insured worker at age 62 or over. In addition to monthly survivor benefits, a lump-sum death payment of $255 is payable upon the death of an insured worker (Stenken).
How is Social Security Funded?
Social Security’s principal job in providing a financial safety net for Americans undoubtedly has a cost: the benefits paid must be financed in some form. Approximately 97% in tax revenue comes from a payroll tax on covered workers and their employers. The employee portion of the Social Security payroll tax is currently 4.2% (was 6.2% in 2010) on the first $106,800 of each employee’s taxable earnings and any earns in excess of $106,800 are not subject to the Social Security tax. The employer’s portion of the Social Security tax in 2011 remains at 6.2% of each employee’s first $106,800 of taxable earnings, and there is no employer Social Security tax on any employee’s earnings...

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