Do you really think Social Security is going bankrupt? Think again - Social Security is here to say… in one for another.
They say Social Security could go Bankrupt- But that’s not Possible.
One of the most illogical scenarios is for Social Security to go bankrupt. Running out of money is not possible for this fund; it can be eliminated or suspended but not penniless. The way Social Security is set up- an immediate transfer of money from people working to those who are retired- it what it has always been and will always be. That is the only way for the Social Security system to work. Let’s take a look at what Social Security is.
What exactly is Social Security?
Social Security is the economic security for millions of Americans. Those receiving benefits from this security are; disabled person, retirees and the family members of disabled, retired or deceased workers. There are over 160 million Americans who pay the Social Security tax and about 60 million who collect monthly benefits from it; that’s about one family out of four who are receiving the benefit.
Social Security is set up much like a pay-as-you-go program with workers paying the tax into the program and the money going back out as monthly income to beneficiaries. This system is completely different from company pensions as the money is collected in advance so it is available later to be paid out when the payee retires.
In the United States it is required of employees and employers to pay Social Security taxes. It will be paid back out to the employee once they retire according to how much was paid in up to a certain maximum amount. If a person has worked longer and paid more in; then they will be eligible for more returned at retirement. The system is also set up to protect those in need. It will pay a disproportionate amount to people earning low incomes as they need money more. In this manner a dollar they pay in will pay out more than a high roller will earn.
What is the Social Security Act?
The Social Security Act was enacted in 1935 during Franklin D. Roosevelt’s first term as President. It was created to limit what they saw at that time as a danger to Americans life styles especially in old age, during poverty, unemployment and the hardship on widows and fatherless children. President Roosevelt was the first president to create federal assistance for the elderly.
The Act provides benefits to retirees and the unemployed and also a lump-sum benefit at death. It also provides money to states so they are able to assist; aged individuals, unemployment insurance, aid to families with dependent children, Maternal and Child Welfare, the blind and public health services. There were two Supreme Court rulings that affirmed the constitutionality of the Social Security Act.
What are Social Security Benefits?
These are some of the different benefits paid by Social Security:
* Retired worker
A worker who has been employed in covered service long enough to be insured. When they reach the age of 62 they can receive benefits equal to the primary insurance amount. When they reach the age of 70 they will then be eligible for the maximum amount.
* Spouse of retired worker
The spouse must have a child under the age of 16 in their care, a disabled child or they must be 62 years old. This will also apply to divorced spouse if they had been married at least ten years
The child of a covered retired worker is eligible for benefits if they are a minor (under the age of 18), a disabled adult before age 22 or a high school student under the age of 19.
* Widow or Parent
An aged widow must be 60 years of age or have children in their care who are under 16 to receive the monthly benefits. A disabled widow who is disabled and is at least 50 years old will receive benefits and upon reaching age 62 they transfer to an aged widow category. The parent of a deceased worker who has been dependent on them and is at least 62 years old is eligible for monthly benefits.
* Disabled worker
A worker who is has been in covered employment long enough to be insured and becomes disabled is eligible for monthly benefits.
* Spouse of a disabled worker
A spouse of a disabled worker must either have a child under the age of 16 in their care or be at least 62 years of age to receive a monthly benefit. This also applies to a divorced spouse if they were married at least 10 years.
What does the Social Security Disability Benefit Cover?
The Social Security Disability program is one of the largest Federal programs to provide assistance for people suffering a disability. The program will pay a benefit to workers and certain members of their family if they have worked long enough to qualify for the insurance coverage. This means the worker has to of worked and paid into Social Security taxes.
When a worker applies for this program they will have to provide medical and other information to qualify for the benefit. Social Security has a different definition of a disability then other programs and will only pay benefits is a worker qualifies under their guidelines:
* You are unable to perform the work you did previously to becoming disabled
* They decide you cannot adjust to other work due to the disability
* The disability is expected to last longer than a year or result in death.
There are no partial or short-term disabilities that will allow a person to collect a monthly benefit. The belief for not allowing these is that Social Security assumes working families have access to other payments such as; workers’ compensation, insurance, savings accounts or investments for short term financial assistance.
The Social Security Office
The Social Security Office is an independent agency of the United States federal government. It is located in Woodlawn, Maryland and includes ten regional offices, eight processing centers, around 1300 field offices and approximately 37 Teleservice Centers. The Social Security operates within its own administrative adjudication system to deny or accept claims. The rulings are decided by Administrative Law Judges and Senior Attorney Adjudicators at different locations across the country. The U.S. Office of Disability Adjudication and Review (ODAR) hear and decides on cases that are being challenged.
Over the years it has developed its own procedural system and it is documented in the Hearings and Appeal Litigation Law Manual. The ODAR settles disputes if one has been turned down or denied benefits. This agency also settles a small number of Medicare claim issues.
Will Social Security Run Out of Money?
According to Steve Goss, chief actuary for the Social Security Administration the program is not in financial trouble due to the current laws that govern it. He states the program is funded by two sources: payroll taxes collected from workers every year and the Social Security Trust Fund. Payroll taxes are the primary source of income for this program.
The program is not allowed to borrow money so there are no other sources funding outside of these two and if the Trust Fund would by some small chance dry up; payroll taxes would continue to support it. The fear and reason for talk about Social Security running out of money is that there are years when taxes fall short of what is being paid out and the Trust Fund is then needed to handle the difference. The same holds true; however, if the taxes collected are more then what is being paid out then the surplus goes into the Trust. Fear of continued short falls is possibly the main reason for people to be worrying about money running out. The Trust Fund could lose its money, but there will always be the taxes that are collected from workers.
Word is out that 2033 will see the depletion of the Trust Fund. It is also seen that taxes after that point will fall short to cover benefits. If this prediction actually comes true then there will definitely be a reduction in benefits to those receiving Social Security monthly payments.
So in the end to answer the question, “Is Social Security going bankrupt?” The answer would have to be, “No.” Politicians will find it a very pressing issue in their run for office and have many following them as they claim to have the answer on how to stop or prevent this myth from happening. The fact out there; however, is the program is designed to continue and it will.