(Late post). There was so much talk Wednesday and Thursday on TV about Social Security apparently being part of the debt-ceiling-and-balance-the-budget negotiations that I had to dig up my two Social Security cards. I got the first one when I arrived in the USA in 1995 – you cannot legally work and pay taxes without one. It says ‘Valid for work only with INS (Immigration and Naturalization Services, now called Homeland Security) authorization. Then I got the ‘permanent’ one when I became a US citizen in 2007.
Social Security is not out of money, but the contributor-beneficiary ratio was 40-1 when Social Security became law in 1935 after the Great Depression — and is 3-1 now. And over the years the trend have been for people to retire earlier and live much longer. So current projections show that in 2023, total income and interest earned on assets will no longer cover expenditures for Social Security. (In the mean time, I wondered : what happens with the excess money the system collects? Well the Social Security Administration system buys US Treasury Bonds with its surpluses. Essentially, the government – in the form of the Social Security Administration – loans the surplus to itself).
What to do, to head off the shortfall ? Some possible remedies are :
Raising the maximum taxable earning levels (for 2011, the maximum taxable earnings amount for Social Security is $106,800. The Social Security tax (OASDI) rate for wages paid in 2011 is 4.2 % for employees and 6.2 % for employers);
Increasing the retirement age;
Reducing cost of living adjustment (COLA);
Changing of the benefit formula.
Ouch. All of them are painful ! I guess we all have to work harder – those of us that have jobs – and save more. But hey, if you have enough money, please go on a shopping spree at the mall, go eat out lots and go the theater for a show every week ! Go ! : ).