Social insurance is designed to keep people from falling into poverty.
Social Security was created in 1935,
It costs over $400 billion per year, and that amount will increase It is
aactually three programs rolled into one:
- Retirement pension,
- Survivors' insurance (for survivors and dependents up to age 18), and
- Disability insurance.
Details (of retirement pension program) :
-
Retirement age: 65 years (reduced benefits can be had after 62 years)
-
Average age at retirement: 63.7 years
-
Retirement age will increase to 67 years in 2027 (going up gradually til then)
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You need to pay FICA tax over your work life to be fully insured
-
If you're below full retirement age you can earn $11,700 without losing SS benefits
Benefits:
- Survivors: dependents of deceased worker, under 18 years old; or spouse if 60 or over
- Spouses and 10 year rule--spouses are covered after they've been married ten years
- Monthly checks
- Amount depends on what you put in to it (there's a range)
- The replacement of income is progressive--in other words, proportionally, poor people get more back (57%), though they put in less (middle rate is 45%, high income earners 38%)
- Comes with cost of living increases (2.1% this year)
- Part of benefits is taxable - either 50% (this goes to the social security trust fund) or 85% (to Medicare)
- Who benefits? Retirees (63%); survivors (15%); disabled workers (12%); families of disabled, retired workers (10%)
- Some differences in benefit levels: men average more ($1000 vs $775 for women, who generally have lower average incomes); whites average more than blacks ($911 vs $775 for African Americans)
- Benefits paid out to 59.2 million people in 2011
- Benefit amounts are adjusted for inflation
- It's guaranteed, and probably the most popular welfare program.
How is it paid for?
- Pay as you go, so the workers of today pay for the retirees of today. Employees and employers each pay 6.2% payroll tax (self-employed pay the full 12.4%, but can deduct half on taxes). State government employees generally have a different plan. Payroll tax is capped at $110,000 (i.e., any income over $110,000 isn't taxed). In 2003, $535 billion was collected
- Any money not paid out is invested, so investments earn returns;
- In 1983, a trust fund was set up for baby boomers (e.g., 2003--$632 b collected; $479 paid out), in anticipation of high retirement rates and fewer workers to pay for them.
- For the past two years, employees have paid only 4.2% into FICA (a 'tax holiday')
Some statistics:
- Most
SS payments go to people who are not poor. It's based on what workers put into it.
- SS benefits are taxed ($12 billion collected in 2003)
- The percent of elderly income dervied from SS increases
from age 65 (about 27%) to age 80 (when about 52% comes from SS). But
most people have other sources of income. The average benefit in year
2000 was $1,000/month. Recent research suggests, though, that future retirees are doing less well saving for retirement (hmmm . . . declining wages . . . increased costs for housing, health care, transportation . . . wonder why??)
SS in trouble?
- The total number of retirees will almost double from about 48 million today to
about 89 million in 2035.
- The trust fund was created in 1983 to address this. But it's been plundered since 2001, to finance war and increased defense and security spending, and service debt.
- The long and short? SS needs more revenue, or reduced benefits (and let's not even talk about the state of Medicare ...)
What to do??
-
Lower benefits to future retirees
-
Add
revenue to the system
-
raise
retirement age (people live longer)
-
privatize
accounts
-
convert
to means-tested program
Some specifics:
-
We
could increase the FICA tax rate.
-
We
could raise the ceiling on taxable income above $110,000.
-
We
could privatize the program (people pay into their own retirement accounts)
-
We
could base benefits on need.
- We could raise
the retirement age.
Some critical
issues:
- Social security
is counter-cyclical:
- It's a popular
program
- Gender
- women and
the 10-year marriage rule for eligibility--is this a 'gendered'
policy? Think about our other discussions of the feminization
of poverty and women's dependence on spouses, for instance
- women and
men's benefits are usually split-survivor of two-earner couples
may earn less than one income-earning families--who lives longer?
- So what to
do?
- Earnings
sharing (add up total earnings and divide by 2)
- Double
decker (two tiers of benefits-there would be a minimum guaranteed
income, and a second part based on combined contributions
of both spouses)
- Homemaker
credits--radical idea, huh? Giving homemakers credit for allowing
their spouses/partners to go out into the workforce.
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