(NewsBreakDaily.com) – Social Security is meant to ensure the economic stability of American citizens. It’s designed to protect the most vulnerable people in our society — the elderly and the disabled.
Establishment of Social Security
During the Great Depression of the 1930s, Americans faced the worst economic crisis the country has ever seen. To make sure devastation like this never happened again, President Franklin Delano Roosevelt signed the Social Security Act in 1935.
The Social Security program ensures that Americans receive a steady income after retiring. It also provides a source of income for adults and children with disabilities as well as the families of workers who have passed away. Most beneficiaries are also eligible for Medicare, providing them with built-in health insurance.
Three out of five Americans count on their Social Security benefits to survive, and approximately 63 million people collect a benefit check. No small number.
How Social Security Works
Workers pay into Social Security through a payroll deduction. The current contribution rate is 15.3% split equally between a company and the employee. When workers pay more money into Social Security than the program pays out to beneficiaries, the excess goes into a trust fund.
This trust fund has amassed approximately $2.9 trillion since 1983. The money in the trust fund is held in US bonds.
This money belongs to those workers because it was theirs in the first place. However, Congress has no problem “borrowing” this money — even when there are doubts as to whether the program is sustainable.
Many people believe that Congress is stealing from Social Security under the guise of “borrowing.” However, any money they borrow is to be paid back with interest, meaning the trust fund makes money from lending to Congress.
The money that Social Security loans to the federal government funds various government activities and helps balance the budget. They borrow this money from Social Security in the form of special-issue bonds repaid at a 2.85% interest rate.
In 2017, Social Security received $85.1 billion in interest income from the federal government. During the next seven years, it’s estimated that Social Security will make a whopping $804.4 billion in interest payments.
It Can’t Last Forever
Despite the aforementioned numbers, which are impressive in themselves, the Social Security trust is expected to be completely depleted by 2034. Why? Because the program will soon start paying out more than it’s bringing in for the first time since 1982.
The amount being paid out to elderly and disabled beneficiaries now is more than the amount being paid in. People are living longer due to medical advances, meaning they collect benefits longer. As a result, Social Security paid out approximately $1.7 billion more than it collected in 2018.
Unfortunately, the income from this program may not provide as much security as it used to. If you’re approaching retirement age, there are several changes coming to the laws that you should be aware of.
For one, the full retirement age has increased from 65 to 67. You can retire early at 62, but you’ll take a hit on the benefit amount. However, if you can hold out until the age of 70, you can maximize your benefits. The maximum dollar amount you can receive has increased, however, more of your Social Security income is now taxed.
The maximum you can receive from Social Security is as follows:
- Retired at age 62 — $2,265
- Retired at age 65 or older — $3,011
- Retired at age 70 — $3,790
While there’s been plenty of talk about raising the retirement age even higher and increasing (or removing) the cap on the tax, there’s radio silence when it comes to Congress repaying the money they’ve borrowed from Social Security.
So what does all this mean to the average American? It means the younger generations can no longer be sure the safety net they paid into will be there when they reach the age that they need it. And, that’s just shameful.
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