Income Security Social Security I spanvideo.org/program/1853 24-2 2005 State of the union 23:17min...
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Transcript of Income Security Social Security I spanvideo.org/program/1853 24-2 2005 State of the union 23:17min...
Income SecuritySocial Security I
http://www.c-spanvideo.org/program/185324-2 2005 State of the union
23:17min The Problem
28 min – 33:20 various solutions proposed (30 min voluntary personal retirement accounts)
Buffer This at start of Lecture
Income Security
Two Types of Benefits1. Cash
2. In-Kind (Food Stamps, Nutrition Programs, Housing Assistance)
Income Security Two types of eligibility
determination1. means-tested programs
not based on prior payment into a fund but on need --income and resources
TANF, SSI (means, age and disability)
http://www.lib.rochester.edu/camelot/RH/rhhome.stm
Income Security
2. insurance-based programs available to people who paid, typically
through payroll deductions, into the funds that maintain these programs.
Social security, workers compensation, unemployment insurance
http://en.wikipedia.org/wiki/The_Three_Musketeers
Social Security
Social Security for Kids Social Security helps people help themselves! People work and give a little money to Social
Security When some people get so sick that they can't work
they get money from Social Security. When people get older and don't work anymore,
they can get money from Social Security. When people die, their family can get money from
Social Security. http://www.ssa.gov/people/kids/assets/sounds/pigfin.wav piggy bank
To Qualify for Social Security Retirement age = 65 to 67 depending on
when born (see next page) Reduced Benefit age = 62 If delay until 70, receive special credit
for each month between 65 and 70 that do not receive benefits.
http://www.ssa.gov/people/kids/assets/sounds/cardfin.wav social security card
http://thewidowsjourney.org/wp-content/uploads/2014/04/2014-BlackRock-Social-Security-Reference-Guide.pdf
http://thewidowsjourney.org/wp-content/uploads/2014/04/2014-BlackRock-Social-Security-Reference-Guide.pdf
http://www.lpl-swmi.com/PDF/SS%20Retirement%20Benefits%202012.pdf
http://www.lpl-swmi.com/PDF/SS%20Retirement%20Benefits%202012.pdf
Social Security for Kids http://www.ssa.gov/kids/#ht=2
“Piggy Bank” and “Social Security Card”
Others show rationale behind social security.
Did Spending on Medicare growing each year since the 1950’s?
1937 began collecting Social Security taxes
•Social Security•Began with Social Security Act of 1935 to deal with the financial chaos of the Great Depression. •Paid retirement benefits to contributing workers
•1939 law changed to add survivors benefits•1940 began regular pension payments
1956 disability benefits added
False, Medicare did not exist until the 1960’s, also
it began to decline in 1996, in this chart.
Social Security Facts
Administered by the Social Security Administration (made independent from the DHHS in 1994) pays monthly benefits to retirees and people who are disabled
as well as a survivor’s benefit to families. It is a source of income for more than 44 million Americans
currently covers 96% of all jobs in the US (see slide 19) since 1975 benefits have been indexed for inflation through the
use of a Cost of Living Adjustment (COLA) the largest program in the federal government (accounts for nearly
24 cents of every federal dollar spent)Source: Rahm 2004
http://en.wikipedia.org/wiki/The_Three_Musketeers
Devolution as Seen from the BudgetAuthor(s): C. Eugene Steuerle, Gordon Mermin
Other Availability: PDF | Order Online | Printer-Friendly Version Published: January 01, 1997
Citation URL: http://www.urban.org/url.cfm?ID=307034
•Funded by taxes collected under the authority of the Federal Insurance Contribution Act (FICA) enacted 1935. Look Familiar?
FICA tax is paid into three trust funds:1. OASI: the Federal Old-Age and Survivors Insurance
used to pay for retirement and survivor’s benefits (what is commonly referred to as “social security”)collects the bulk of the funds (10.7% of each employee’s gross wages)
2. DI: the Federal Disability Insurance trust fund
used to pay for benefits to the disabled(1.7% of each employee’s gross wages)
3. Medicare: helps pay for healthcare of elderly (2.9% of each employee’s gross wages)
payroll tax of 15.3% of gross wages (employee and employer each pay 7.65%)
the employer deducts 7.65 percent of the employee’s earnings, matches that amount, and sends it to the IRS. (self-employed pay the full amount)
The Post Standard, Sunday Feb 20, 2005 Page C-1
To qualify for Soc Sec: accumulate credits associated with your
social security number earn a maximum of 4 credits per year each year amount of earnings needed for a credit
rises as average earnings levels rise (i.e. in 2001 $830 paid into the fund earned 1 credit
toward future benefits – in 2012 it is $1,130, now its $1,200)
the # of credits required for benefits varies by age and the type of benefits claimed
for most taxpayers it takes 40 credits (approx. 10 years of work) to qualify for retirement benefits.
Source: Rahm 2004
To qualify for Soc Sec:
Not everyone earns credits many federal and state
employees not included also excluded: railroad workers,
children <21 who work in their parents’ business
Source: Rahm 2004
The Social Security Benefit Benefits vary by how much you pay into the
fund Typically, receive benefits that approximate
40% of your average lifetime earnings. Since your wages typically are lower at your
first job and then grow, your average lifetime earnings are almost certainly lower than your earned income over the last few years of working
Source: Rahm 2004
The “Three-Legged Stool” 1. Social Security
2. Private Pension
3. Personal Savings and Investment
Unfortunately many over-rely on Soc Sec
–Source: Devroye 2003
Sources of Income Among those Aged 65-69 (1994)Other, 4
Earnings, 33
Employer Pensions,
18
Income from Other
Assets, 15
Social Security,
31
Quinn 1998
Sources of Income Among those Aged 75-79 (1994)
Social Security, 48
Earnings, 8
Employer Pensions, 20
Income from Other Assets,
20
Other, 4
Quinn 1998
Approaching the root of today’s problems…Building towards the question of: What do you think we should do about social security?
The Present Configuration Defined-benefit pension:
Can compute the benefits you will receive based on payments you make when you are working
An Alternative: defined contribution where you would make specific payments now
and your benefits would depend on how the stock market performed
–Source: Devroye 2003
The Present Configuration Pay-as-you go plan
The payroll taxes paid by today’s workers and their employers are used mostly to fund benefits for today’s retirees.
–Source: Devroye 2003
http://www.urban.org/Template.cfm?Section=ByAuthor&NavMenuID=63&template=/TaggedContent/ViewPublication.cfm&PublicationID=8216
The Post Standard, Sunday Feb 20, 2005 Page C-1
http://www.c-spanvideo.org/program/185324-2
2005 State of the union
23:17min The Problem
28 min – 33:20 various solutions proposed (30 min voluntary personal retirement accounts)
So what is the problem?