In 1935, President Franklin D. Roosevelt signed into law the Social Security Act, which formed Social Security. This federal safety net was meant for the ageing individuals, disadvantaged and unemployed Americans (Schnaubelt, 2018). Paying financial benefits to the retirees who were aged over 65 years old founded on the lifetime payroll tax offerings was the critical condition of the original Social Security Act. Therefore, the program was intended for workers to finance their remunerations via added earnings taxes. Initially, Social Security simply gave retirement benefits to employees who had earned income history, however, in 1939, dualistic modifications were made to the program extending dependents and survivors' benefits of the individuals with earned Social Security benefits (Schnaubelt, 2018). It is worth mentioning that tens of millions of Americans had gotten financial assistance via the Social Security Act from the time when it commenced. Although the program experienced some challenges from the beginning and has been a political hot topic for decades, it is being threatened time and again.
Social Security's viability in 20-30 years to come
A large number of retirees in the United States rely on Social Security for a share of their salary. The Social Security retirement benefits generally symbolize around 38% of the earnings for seniors, but more than half of the couples who are married that claim benefits and closely 3 out of 4 retirees who are not married rely on the program for 50% or more of their earnings (Schnaubelt, 2018). However, several people in the United States have suspicions concerning Social Security upon their retirement. According to the AARP study, it is only 43% of the Americans that express assurance in Social Security's future. It is because, in 2034, the trust fund for Social Security retirement is estimated to be depleted. Thus, the program is estimated to pay out around 75% of the benefits after that (Schnaubelt, 2018).
The primary cause of Social Security that quickly shrinks trust fund is the baby boomers who are approximated to be 10,000 who retire each day. The number of American citizens projected to be qualified for retirement benefits by 2033 will rise from 46.6 million today to more than 77 million (Anderson, 2015). However, in the time being, the ration of workers who pay into Social Security to the beneficiaries of the program is estimated to collapse from 2.8 currently to 2.1 in 2033 (Anderson, 2015). In 2015, the Social Security benefits amounted to around 55 of the United States' GDP. The National Academy of Social insurance indicates that the Social Security benefits under the present law are estimated to be 6.2 per cent of America's GDP by 2035; once the youngest baby boomers have turned 70 years old (Anderson, 2015). It translates to a 1.2% rise over the existing cost of Social Security (Anderson, 2015).
Funding has become a significant concern today though there has been a looming threat of the collapse of Social Security for some time. According to SSA, Social Security programs face long-term insolvency issues (Anderson, 2015). Without new legislation of reforming Social Security currently, the program is anticipated to undergo crucial encounters in the next 20 years. It might be met with reduced benefits, increase in taxes, or borrowing from other government segments. Hence, the funding gap of Social Security needs to be closed by lawmakers by reducing benefits and raising revenue for the program.
Recommendations for improvements in Social Security's viability for future generations
Raising payroll taxes thus strengthening Social Security
Raising the payroll tax revenue of Social Security is acceptable by the latest trends. Since policymakers addressed solvency in 1983, the tax base of Social Security has drastically eroded mostly because of an increase in the variation and the increasing cost of untaxed fringe benefits such as health insurance. Therefore to improve the solvency of the program, it would need to increase or eliminate the program's cap on taxable wage. Currently, $118,500 annually (Romig, 2016). Increasing the cap will assist in mitigating the erosion of the program's payroll tax base triggered by increasing wage inequity. Moreover, widening reimbursement subject to Social Security payroll taxes to encompass fringe is effective in strengthening the program, thus leading to more benefits in the program (Romig, 2016).
Increase the full retirement age
The age when a person qualifies to receive full Social Security retirement benefits has been rising from 65 years on a plan put in place by Congress in 1983. It has gotten to 66 years, and it will slowly upsurge to 67 to people born in 1960 and beyond (Anderson, 2015). Therefore, rising the full retirement age more is a choice of assisting close the funding gap of the program. Raising the full retirement age of Social Security marginally and on a schedule that is well-known to reflect the longer lifespans of Americans is a good and common-sense method to improve the finances of the program. Raising the full age retirement age to 68 by 2028 is projected to fill 16% of the funding gap (Romig, 2016).
The benefits provided to the retirees and their families are too low, and in an effort of strengthening Social Security, lawmakers should contemplate on raising benefits for the receivers who are more vulnerable (Anderson, 2015). It should include an increase in benefits for the surviving spouse and earning credits for individuals that are unemployed because they are taking care of a child or other family members. This is projected to upsurge the funding gap by up to 10 per cent.
Politics are a barrier to putting modifications to Social Security. During the Obama administration, it suggested changing payroll between the disability funds and retirement benefits of Social Security; however, the Republican lawmakers in Congress needed substantial adjustments to Social Security before funds were moved. Therefore, previously Republican and Democratic governments have shifted payroll tax revenue 11 times to repair deficits amongst two trust funds. The Clinton administration used such an approach in 1994; hence it is possible to be used in future (Romig, 2016). The last significant changes made to the program were in 1983. The process took a bipartisan commission to head the process headed by Alan Greenspan, 12 months of dialogues with policymakers and 22 years of phasing in a diffident rise in the full retirement age (Anderson, 2015). Thus, the policymakers should seriously put into consideration raising payroll taxes to support this crucial program. Hence raising revenues is necessary to restore solvency. In summation, increasing the tax cap and counting health insurance premiums as earnings would spread the supplementary contributions more equally all over the incomes scale. Any of the given alternatives would significantly assist in ensuring that the Social Security program can pay benefits for future generations.
Anderson, T. (2015). Social Security's next 80 years. CNBC. Retrieved 29 June 2020, from https://www.cnbc.com/2015/08/13/social-securitys-next-80-years.html.
Romig, K. (2016). Increasing Payroll Taxes Would Strengthen Social Security. Center on Budget and Policy Priorities. Retrieved 30 June 2020, from https://www.cbpp.org/research/social-security/increasing-payroll-taxes-would-strengthen-social-security.
Schnaubelt, C. (2018). Social Security: Past, Present And Future. Forbes. Retrieved 29 June 2020, from https://www.forbes.com/sites/catherineschnaubelt/2018/05/30/social-security-past-present-and-future/#7fa62f0759ab.
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