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Social Security has been with us for sixty plus years - it's hard to believe. The first Social Security check went out in the mail in 1940 even though President Roosevelt had signed the Social Security Act into law, five years earlier. Since that time, quite a few American seniors have been thankful to receive that monthly financial safety net as they enter their retirement years.
In the original incarnation of the bill, Social Security benefits were only to be paid to the primary worker. But, before the bill went live, additional benefits for the spouse and children were added.
Many people mistakenly believe that the Social Security system is like an investment annuity, where you lend money to the government and let them invest it with the expectation that you will live off the resulting income. In truth, however, the system is closer to a government welfare program. The collection of payroll taxes , which funds the Social Security program, is handled under the authorization of the Federal Insurance Contributions Act, better known as FICA. FICA is like the enforcement arm of the system. It ensures that every worker "contributes" his or her fair share to the government pool.
Every new generation of workers is obligated to care for the previous generation's retirees. The sum of money that you eventually receive from the government has only a slight relationship to the amount of money that was withheld from your check over the years. From the very beginning, the system has collected over 9 trillion dollars from contributors and paid them out to recipients.
But the 1940 statute did not merely quit with allowing retirees to collect benefits. The law also consisted of the first incarnations of the welfare and unemployment systems which are still very much in evidence today.
Nowadays, with millions of folks losing their jobs each month, with our financial systems going into the sewer, and the home crisis blowing up around us - these safety nets are becoming more crucial than ever before. A lot of retired women, especially, are just barely able to make ends meet even with the help of Social Security. Primariy, this is because women today are less likely than men to have additional sources of income. Partly due to working less years in the workforce because of child raising responsibilities. And partly because, even while in the work force, women typically are paid less than men. Luckily, this situation seems to be gradually changing,
But even families that don't necessarily need Social Security to survive are helped by it. In fact, according to independent studies, if the government were suddenly to get rid of Social Security, many retired families would experience a drop in their living standards of 70% or more.
Many people fear that the system cannot sustain itself. In fact, there have been times in the past when the amount of money paid to recipients exceeded the amount of money collected via FICA. In these cases, Trust bonds were sold to make up the shortfall. Because of circumstances like these, Congress has occasionally upped the percentage of gross income that FICA can collect from salaries. Even these modifications, however, as the population ages and simultaneously live longer, may not be enough to sustain the system without drastic changes to the system.
The Social Security program is the largest government program of the country - constituting over twenty percent of the federal budget. As some politicians look at cutting the size and expenses of government, this program has an inviting target on its back. To many people, however, the cost of losing this critical system could ultimately be much more than the cost of running budget deficits.
Eric Bayne is writer and researcher for www.retirementplanhelper.com . Many retirees are traveling more these days. Visit his site to learn more about retirement travel as well as other retirement related issues.
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