How does Social Security work? What's this about Social Security running out? All the details on the past, present, and future of Social Security are laid out in this easy to follow infographic.
It’s a common fear, especially as the years creep up on us. We worry about Social Security, and whether the program will even exist when we’re ready to retire.
It’s little wonder. According to a new survey from Gallup, 34 percent of non-retirees say they are counting on Social Security to provide a significant portion of their retirement dollars. That’s up from 27 percent who said the same thing in 2007. Even worse, this number has been above 30 percent for the last three years.
It’s unfortunate because Social Security should really serve as a type of safety net for retirees. The majority of retirees’ retirement dollars should come from such investment vehicles as IRAs and 401(k) plans and from their savings.
As of April of 2009, the Social Security dan.wesleyistration reported that 48 million people were receiving Social Security payments. This meant that Social Security took up a rather astounding 16.8 percent of the entire federal budget. The budget for Social Security in 2009 was $675 billion.
According to the Congressional Budget Office, the country will face a Social Security shortfall in the future if nothing changes. The budget office’s number crunchers estimated that the country’s Social Security fund would be exhausted by 2041 at the current pace. Again, though, this is reliant on nothing changing. You can bet that Congress won’t ever let Social Security die. It would be a political disaster.
President Obama wrote in a newspaper op-ed piece back in 2007, when he was a U.S. Senator, that if the country simply eliminated the cap on payroll tax, the Social Security shortfall could be resolved. Currently, the payroll tax that funds Social Security only applies to the first $97,000 people make. If the government instead charged the payroll tax to all the money people earned, it would raise more than $1 trillion to supplement the Social Security fund.
Some like this because as Social Security funding stands now, those people with higher yearly incomes pay a smaller percentage of their money to fund the program. Those who make less see a larger percentage of their income go toward Social Security. Under the payroll tax suggestion, everyone would give up 12.4 percent of their income to the payroll tax.
George W. Bush in 2005 made headlines when he proposed the idea of “personal accounts.” Under this system, workers could set aside some of their payroll tax to be invested in stocks and bonds, which they would then save for their retirement. That’s a bit of a risky plan, though; if the stock market crashed at the wrong time, soon-to-be retirees could be left far short of the money they’d need to support themselves through their retirement. Perhaps because of this, the program never did come to fruition.