Just the Facts...About Social Security
Tenille Martin

An easy to understand outline of social security
For most of us, Social Security is the check our grandparents receive, or the chunk of money taken out of each paycheck. It's the elusive pot of gold that we will receive during our retirement. Well, maybe not gold...loose change?

When President Roosevelt created Social Security (SS) during the Depression, it was considered one element of a secure retirement plan for Americans. Though a large part of the plan, SS was meant to join with personal savings and the private pension supplied by employers. Unfortunately, since its inception SS has become the primary retirement savings for many citizens. The question is...will it be there when they retire?

How does SS work?

Social Security taxes are collected by the IRS and are "deposited" into a trust fund that is used to pay benefits to current retirees. Now, don't let that confuse you. It is not a bank account that the government withdraws and deposits payments from. Instead, in simplest terms...it's a piece of paper.

In 2000, SS tax was taken out of the first $76,200 earned by every employee. (Compared with $7,800 in 1971.) In fact, 75% of Americans spend more in SS than income taxes! SS provides a lifetime monthly income to workers and their spouses when the reach retirement age (65). The income is based on the length of time they were employed and the amount of money they earned. Obviously, lower income workers are especially hit hard and are rarely able to live on SS alone.

Where Does My Money Go?

In a speech before the Senate in 1999, US Comptroller General David Walker estimated that the cost of the existing form of SS would more than double by 2034. What does that mean? Well, in 1950, there were sixteen people paying into the system for every one retiree. In 2000, that number was down to three; and it's estimated that in 2030, there will only be two workers for every one retiree. Why? There are several reasons for the increasing demands on SS. * With the increase in life expectancy, SS recipients are drawing more out of the system. * Interest rates earned on SS are between 1-2% after inflation per year

Options?

There are many officials pressing for SS reform in both parties. According to the Social Security Administration 1999 Annual Report, if Congress does nothing to reform SS, deficits on the system will begin in 2017.

Two options widely supported are personal retirement funds and government savings funds. Yes, it's pretty much what it sounds like... you saving for retirement or the government saving for you. Some of the positive features of personal retirement funds are: + Higher interest rates + More control for retirees + Better for the economy However, they would also be harder on those in lower income brackets who are already getting less from the system; As well as those who aren't comfortable handling investments.

Tenille is currently a freelance writer and editor. She is a former professional ballet dancer and actress.