Social Security Tax System Essay Example For Students

Social Security Tax System Essay Revamping Our Future Social Security Tax SystemThispaper will discuss the current United States Social Security Tax system, thepurpose of that system and our goal for selecting this topic. Also, it willexplain our analysis of its current standing, different ideas about what tochange in our current standing to secure and guarantee a strong future for it. We will conclude by recommending the best course to accomplish this goal. Contents Abstract 2 Contents 3 Title 4 Current U.S.A. Social Security Tax System4 Low Risk Investment 7 High Risk Investment 8 Graph: Social Security TaxIncreases 9 Conclusion/Recommendations 11 References 12 Revamping Our SocialSecurity Tax System to Secure its future Current U.S.A. Social Security TaxSystem Social Security has been around for more than 60 years. It has been animportant part of American life. It was created in 1935 shortly after the greatdepression. Social Security was created to be a protection for the Americanpeople against the hazards of unemployment, old age, and ill health. TodaySocial Security not only provides minimum protection for the retired worker, italso provides benefits for workers and their families due to death of a familywage earner or loss of income due to disability. Today there are about 150million workers who are protected by social security, more than 44 millionreceive retirement, survivors and disability benefits form social security. American wage earners and their families are protected by social security andthey pay taxes to help make the system work. There are two philosophies SocialSecurity bases its payments on. First, the system is designed so that there is alink between how much a wage earner pays into the system and how much he or shewill receive in benefits. For example, a high wage earner will receive morebenefits while a low wage earner will receive less. Second, a base for economicsecurity is provided by the Social Security system. Social Security provides avaluable package of retirement, disability and survivors insurance, whichrelieves families of financial burdens from supporting other family members. Social Security has made an enormous difference in the lives of older Americans. American workers can retire as early as age 62. At this age, wage earners areeligible to get reduced benefits from Social Security. Wage earners may wait forfull retirement age to be eligible for full retirement benefits. Currently, fullretirement age is 65, but will be moved up gradually starting in 2003. The newretirement age will be 67 for people born in 1960 or later. Social benefitspayments are paid out to more than 9 in 10 retirees. In America, only 11 percentof senior citizens live in poverty. Without Social Security benefits, thepercentage of seniors living in poverty would be much higher. Social Security isthe major source of income for about two-thirds of elderly Americans, and forabut a third Social Security is virtually their only source of income. RetiredAmericans are given a dependable monthly income from Social Security. Automaticincreases are tied to increases in the cost of living. Social Security givesretired American citizens a measure of deserved financial indepen dence (and thatmeasure is becoming lower every year). Social Security is more than a retirementprogram. It is also a protection plan for American citizens. Valuable disabilityand survivors insurance protection are given to younger wage earners and theirfamilies. There are about 1 in 3 workers who are Social Security beneficiariesthat are not retired. Monthly survivors benefits are given to about 7.5 millionpeople and more than 6 million workers and family members receive disabilitybenefits. Social Security provides a foundation on which to build retirementsecurity. Social Security, pensions and savings is a three-legged financialstool for a comfortable retirement. Unfortunately, there is only a little morethan half of all workers whose employers have pension plans; and people are notsaving for their future retirement. Pre-retirement earnings for the averageworker are about 40 percent, provided by Social Security. Financial advisors saythat the average worker will need 70 percent of pre- retirement earnings to livecomfortably. Saving is an important part of retirement planning. Social Securitywill begin mailing statements to workers age 25 and older. The statement willshow a workers earnings history, as well as giving estimates of retirement,survivors and disability benefits. This statement will help with futurefinancial planning. Demographics have been the main reason for Social Securityslong-range financing problem. People, today, are living longer and healthierlives. In 1935, when Social Security was created, a 65-year-old persons averagelife expectancy was 12 1/2 more years. Today, it is about 17 1/2 years andraising. And to add to this, at about 2010, 76 million baby boomers will beretiring. There will be nearly twice as many older Americans as there is todayin about 30 years. And at the same time, the number of wage earners payingSocial Security taxes, per beneficiary, will drop form 3.3 to 2. Americasretirement system will be strained caused by these cha nges. SocialSecurity is an economic compact among generations. Many people think that theirSocial Security tax contributions are held in interest-bearing accountsearmarked for their own future retirement needs. Social Security is actually anintergenerational compact the Social Security taxes paid by todays workersand their employers go mostly to fund benefit payments for toadys retirees. A Review Of Ralph Elisons Invisible Man EssayThe president says this course of action will keep Social Security solvent until2055. At the heart of his plan is a proposal to allocate 11 percent of surplusesto create universal savings accounts. These government-subsidizedUSA accounts: would help individuals save for retirement. A portion ofindividual savings in the accounts would receive matching federal funds. Inaddition, Clinton says he is dedicated to working with Congress on a bipartisanplan that would shore up Social Security until 2075. These negotiations willinvolve controversial issues, whether to raise taxes, slash benefits or raisethe retirement age. Some Republicans, most notably in the House, prefer thatsome of the surplus be returned to taxpayers in the form of tax cuts. Thetaxpayers would then be free to invest this money as they choose, possibly inhigh-yield private savings accounts. But many lawmakers across the politicalspectrum say that cutting taxes would be tantam ount to squandering the surplus. These lawmakers generally agree that the current budget surplus presents anhistoric opportunity to shore up the disintegrating Social Security system. Republicans have said that they are reserving H.R. 1 for legislation based onthe presidents Social Security plan, when and if it is offered. This Policy.comSpecial Report examines the present and future of the embattled Social Securitysystem. Focusing first on the workings of the system, this report explores theleading reform and privatization proposals being discussed in Washington. Thereport also features an examination of how Social Security effects women andminorities, links to Social Security calculators, polls and Policy.com featureevents on retirement security and Social Security reform. Conclusion/Recommendations We feel that something must be done to the SocialSecurity Tax System, especially as it stands now, to secure a bright and strongfuture. We feel that the Keynesian approach, with a mixed investment base byeach individual will satisfy its future. References Social Security. (1999). TheFuture of Social Security . Available: http://www.ssa.gov/pubs/1055.html. Apfel, K.S. (1998). President Clintons State of the Union. Available: http://ssa.gov/press/state_of union_ press.html . Social Security at the Crossroads, Amy Steinhttp (Online). http://www.policy.com/issuewk/1999/0306_60/Intro60.htmlBibliographyReferences Social Security. (1999). The Future of Social Security . Available: http://www.ssa.gov/pubs/1055.html . Apfel, K.S. (1998). President Clintons State of the Union . Available: http://ssa.gov/press/state_ofunion_ press.html . Social Security at the Crossroads, AmySteinhttp (Online). http://www.policy.com/issuewk/1999/0306_60/Intro60.html