December 5, 2010
The Future of Social Security
In the United States, many people believe that Social Security will be enough to support them upon retirement and have not prepared themselves adequately by establishing pensions, retirement plans and savings accounts. Believing this way can get many people into trouble once they reach an age that they would like to retire. These people are finding out that Social Security is just not enough by itself. Many people are discovering that they need other means of income along with Social Security to survive and pay the bills. If this has not been planned for ahead of time, many people find themselves working past retirement age, or moving in with family as a means to get by. When Social Security was created, the idea was that it would support a person upon retirement. However, at that time, people were not living as long as they do now and the standard of living was much lower. In 1930, the Census, which is a count of all of the people in the United States, found that 58% of men over 65 were still working; by 2002, the number had declined to 18% (New York Times, Nov. 11, 2010). A fact such as this is something that could put a significant strain on the Social Security Administration making many wonder if it will be around for much longer, considering Social Security did not make adjustments for inflation, it pays more than just the retired worker, and the baby boomer generation was not expected when it was created, with little solutions to resolve these issues. Originally, the Social Security Act, signed into effect in 1935 by President Roosevelt, did not include any adjustment for inflation. In 1950, Congress increased benefits and then continued to do so here and there. In 1972, President Nixon introduced the COLA (Cost of Living Adjustment). “COLA is an adjustment made to a salary structure to account for the change to an index. COLA adjustments are then made to individual salaries based on company policy and are typically granted to employees as “general salary increases”. COLAs have historically been a part of bargaining agreements and related to manufacturing operations and labor employees” (hrVillage.com, labor relations, hr FAQ’s). Apparently, according to the Obama administration and the Congressional Budget Office, Social Security beneficiaries will not receive any COLA increase in 2010 or 2011. Part of the reasoning behind this decision could be because in 2011, the system will pay out more in benefits than it receives in payroll taxes. This was not expected to happen until 2016. As far as the Cost of Living Adjustment, some retirees may find interesting the fact that whether or not they receive a “raise” is not even based on their own spending patterns. It is based on the buying habits of working people. It would seem more fair if the Cost of Living Adjustments for retirees were based on figures that actually represented the spending patterns of retirees. Social Security not only pays retired workers, it pays for retired worker’s dependents, under-age survivors of deceased workers, and the disabled, among others. The money to pay for the huge endeavor of Social Security comes from payroll taxes on current workers and on their employers. When Social Security was created in 1935, it was not a popular idea. Many people thought that it would actually cause a loss of jobs and many people were opposed to it. It has become a lifeline, though, for many elderly people. Many elderly also have to depend on family to take care of them because Social Security is not enough. Medicare, which is a program for the elderly, and receives a portion of the Social Security payroll tax, was extended to cover disabled people in 1972. Social Security Disability Insurance comes from Social Security. Many people are under the impression that it does not come out of the same fund, however, this is not...