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Social Security Benefits

Questions and Answers About the Future of Social Security Benefits

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It's true that Social Security benefits are in serious financial trouble.

To help you understand the problems and learn which solutions are being considered, here's a list of frequently asked questions about the future of Social Security.

    Q: I hear that Social Security is in financial trouble? Why?

    A: It is true that Social Security benefits are experiencing financing problems, and while this will not affect today's retirees and near-retirees, the problems are very serious. People live longer, the first baby boomers are five years from retirement, and the birth rate is low.

    This results in a large drop in the worker-to-beneficiary ratio. For example, in 1950 the worker-to-beneficiary ratio was 16-to-one. Currently the ratio is 3.3-to-one, and within 40 years it will be 2-to-1. At this rate of decline there will not be enough workers to pay scheduled benefits at current tax rates.

    Q: How big is the future problem?

    A: Plain and simple, without a large infusion of additional revenue, Social Security benefits are not sustainable over the long term. There will be a massive and growing shortfall over the next 75 years.

    Q: What will happen if Social Security is not changed?

    A: If Social Security is not changed, payroll taxes will have to be increased, the benefits of today's younger workers will have to be cut, or massive transfers from general revenues will be required.

    Q: What are the alternatives are being considered to improve the status of Social Security benefits?

    A: Four basic alternatives are being considered, either individually or in combination:

    • Increasing payroll taxes

    • Decreasing benefits

    • Using general revenues

    • “Prefunding” future benefits through either voluntary personal savings accounts or direct investments of the trust funds

    Q: What is a voluntary personal retirement account?

    A: Among the proposals being considered is to model a personal savings account plan for Social Security after the federal government's Thrift Savings Plan for federal employees and members of Congress. This plan provides a choice of five diversified, low-cost mutual funds.

    Q: Does President Bush have a specific plan to modernize and reform the Social Security benefit program?

    A: No. The President has not presented a specific plan to reform Social Security. He has established principles for reform that include preserving Social Security benefits for current retirees and near-retirees; not increasing Social Security taxes, and encouraging individuals to create voluntary personal retirement accounts to augment Social Security benefits in the future.

    Q: I am now retired and I receive a monthly Social Security benefit check. Will my monthly payments be cut?

    A: There are no plans to cut benefits for current retirees, and the Social Security Administration {SSA} says that Social Security benefits will continue to be increased each year with inflation.

    Q: I plan to retire in five to 10 years. Can I expect to receive my presently scheduled Social Security benefits at that time?

    A: According to the SSA, many reform plans, including the plans from the President's Commission to Strengthen Social Security, preserve scheduled benefits and cost- of-living increases for near-retirees. Depending on the proposal, a "near-retiree" is defined as someone aged 50 to 55 and older.

    Q: How will this affect people who receive Social Security disability benefits?

    A: Most plans under consideration do not reduce the benefits of currently disabled beneficiaries.

    Q: If nothing is done to improve Social Security, what can a 35-year-old expect to receive in retirement benefits from the program?

    A: Unless changes are made, the SSA indicates that at age 73 your scheduled Social Security benefits could be reduced by 27 percent, and they could continue to be reduced every year thereafter from your presently scheduled levels.

    Q: If nothing is done to improve Social Security, what can a 25-year-old expect to receive in retirement benefits from the program?

    A: Unless changes are made, when today’s 25-year-old reaches age 63 in 2042, benefits for all retirees could be cut by 27 percent and could continue to be reduced every year thereafter. According to the SSA, a person who lives to be 100 years old in 2079 (which will be more common at that time), could have scheduled Social Security benefits reduced to 33 percent below today's scheduled levels.

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