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Getting to the Bottom of Social Security

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What is Social Security? ... working lives are cut short by death or disability, private accounts will be too ... .org/issue_advocacy/index.cfm. Action Network ... – PowerPoint PPT presentation

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Title: Getting to the Bottom of Social Security


1
Getting to the Bottom ofSocial Security
  • Values Economics Influence

Lisa M. Maatz American Association of University
Women
2
What is Social Security?
  • SS is a national commitment through which we care
    for one another across the generations
  • Its not an investment program its a social
    insurance program that protects against
    catastrophic loss of income
  • SS is a shared risk program were all in it
    together

3
How Social Security Works
  • When we pay FICA taxes, workers receive SS
    credits at a maximum of 4 credits per year
  • Employers and employees pay taxes equally into
    the system
  • Only wages up to 90,000 are subject to SS taxes
  • The amount of the SS benefit is based on a
    worker's top 35 years of earnings averaged over
    an entire working career
  • Early retirement -- at age 62 -- means a lower
    guaranteed lifetime benefit over a longer period
    of time
  • The age of retirement with full benefits is being
    incrementally raised from age 65 to age 67 for
    those born before 1960
  • Social Security is a pay-as-you-go system
  • Guaranteed, lifetime, inflation-protected benefit
  • Administrative costs for the Social Security
    program are about 1 of benefits

4
Social Security is not Simply a Retirement Program
  • SS provides lifelong family protections
  • Just half of all Social Security beneficiaries
    receive benefits solely as retired workers
  • Remaining SS beneficiaries are children, widows,
    spouses, and people with disabilities
  • Social Security supports more children than TANF
  • For a young family, SS provides the equivalent of
    a 400,000 life insurance policy and a 350,000
    disability insurance policy
  • 75 of private sector workers have no long-term
    disability insurance except for their SS
    coverage

5
Social Security IS your Moms Retirement
  • SS prevents massive poverty among the elderly
  • Without SS, over half of all women 65 and older
    would be poor
  • SS lifted nearly 7 million older women and 4.7
    million older men out of poverty in 2000
  • The income that SS provides to the elderly
    benefits multiple generations, easing the
    financial burden on adult children who are saving
    for their own families
  • homes, education, retirement

6
Why are We Talking about theFuture of Social
Security?
  • For the past several decades, the Social Security
    system has intentionally operated with a surplus
  • More workers paying into the system than
    beneficiaries drawing on the system
    (pay-as-you-go)
  • That surplus is placed into the SS Trust Fund
  • When the baby boomers retire, the surpluses end
    and those funds are used for their benefits
  • More beneficiaries drawing on the system, lower
    ratio of workers paying into it

7
A Fictional Crisis
  • Given the surplus in the SS Trust Fund, this
    increase in beneficiaries should not present a
    problem
  • The federal government borrowed from the SS Trust
    Fund to cover discretionary spending priorities
    and mask the true extent of the deficit
  • The SS Trust Fund was issued IOUs from the
    government in the form of interest-bearing
    Treasury bonds
  • One of the most conservative and stable
    investments available

8
A Long-term Question Not a Crisis
  • The SS Trust Fund must be repaid to cover the
    expected benefit levels required in the coming
    years
  • Starting in 2017 the bonds must be repaid
  • SS still paying 100 of benefits
  • Bonds will be fully repaid by
  • SS Trustees 2041 CBO 2052
  • Roughly 75-80 benefits thereafter

9
Privatization IS the Crisis
  • Privatization weakens SS Remember pay-as-you-go
  • 2 trillion over 10 years
  • 5 trillion over 20 years
  • Takes away social insurance nature of the
    program, puts the risk on the individual
  • The Presidential Commission's plan cuts SS
    benefits
  • Changes SS benefit formula
  • Even for those who work and contribute until
    retirement, CBO projects that private accounts
    are unlikely to make up for SS cuts

10
Privatization IS the Crisis
  • Enrolling in a private account may be voluntary
    (up to 4), but the cuts affects ALL future
    beneficiaries
  • Even those who do NOT chose the private option
    for themselves
  • SS benefits would be cut even further for those
    who contribute to a private account
  • When working lives are cut short by death or
    disability, private accounts will be too small to
    make up for the difference

11
Privatization Threatens UniqueSocial Insurance
Features
  • Lifetime benefits that cannot be outlived
  • Guaranteed, predictable benefits that dont
    fluctuate with the stock market
  • Inflation protected benefits annual COLAs are
    particularly important to those with long
    lifespan
  • Progressive benefit formula that replaces a
    higher of pre-retirement income to low earners
  • Automatic and supplementary benefits for spouses,
    ex-spouses, and surviving spouses
  • These protections cannot be replicated by private
    accounts

12
Social Security Matters
  • To Children
  • Roughly 1 in 12 of all SS beneficiaries are
    children
  • 5.4 million kids under age 18 lived in families
    where someone received SS
  • Lifts millions of children out of poverty
  • To Women
  • Women's wages continue to lag significantly
    behind men's (76)
  • Women live longer, poorer lives than men
  • Women of color are most likely to be poor in old
    age
  • Women are the primary caregivers for children and
    older people

13
Social Security Matters
  • To Racial and Ethnic Minorities
  • 1 in 16 African American children receive SS
    benefits
  • Latinos have higher average life expectancy
  • Generally
  • SS is the main source of retirement income
  • Higher disability rates and lower lifetime wages
  • Less likely to have income from private
    pensions/other assets
  • To People with Disabilities
  • A 20 year old today has a 1 in 6 chance of
    becoming disabled before reaching retirement
  • SS provides lifetime income support to about
    730,000 disabled adult children (based on a
    parents work record)
  • More than 1/3 of SS benefits are made to 17
    million people who are disabled workers and
    their dependents

14
AAUWs Position
  • Anti-privatization Strengthen, dont dismantle
    SS
  • SS is the most successful anti-poverty program in
    the nations history
  • Privatization proposals weaken Social
    Securitymaking the problem worse, not better
  • Modest adjustments could ensure the Trust fund
    could pay of 100 of guaranteed benefits for the
    next 75 years

15
Join AAUW in the Fight!
  • For more information, visit
  • http//www.aauw.org/issue_advocacy/index.cfm
  • Action Network
  • Note Special thanks to the National Womens Law
    Center for some statistical analysis used in this
    presentation
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