Social Security

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Social Security FAQs

From the Social Security Website: http://www.ssa.gov/qa.htm

Q,.

I am retired and receiving a monthly check from Social Security. Are my monthly payments going to be cut? A.

No, there are no plans to cut benefits for current retirees. In fact, benefits will continue to be increased each year with inflation.

Q.

I'll be retiring in the next five to 10 years. Can I expect my presently scheduled benefits to be paid to me at retirement?

A.

Many reform plans, including those put forth by the President's Commission to Strengthen Social Security in 2001, preserve scheduled benefits, including cost- of-living increases, for near-retirees. President Bush has defined a "near-retiree" as someone aged 55 and older.

Q.

My parents are receiving Social Security payments. Should I be worried that their monthly checks will be cut and that I will have to make up the difference?

A.

No, there are no plans to reduce benefits for current retirees. In fact, benefits will continue to grow annually with inflation.

Q.

I am receiving disability benefits from Social Security. Should I be worried that my monthly check will be cut?

A.

Most plans, including those put forth by the President's Commission to Strengthen Social Security, do not reduce the benefits of currently disabled beneficiaries.

Q.

I'm 35 years old. If nothing is done to improve Social Security, what can I expect to receive in retirement benefits from the program?

A.

Unless changes are made, at age 69 in 2040 your scheduled benefits could be reduced by 26 percent and could continue to be reduced every year thereafter from presently scheduled levels. See the 2006 Trustees Report.

Q.

I'm 26 years old. If nothing is done to change Social Security, what can I expect to receive in retirement benefits from the program?

A.

Unless changes are made, when you reach age 60 in 2040, benefits for all retirees could be cut by 26 percent and could continue to be reduced every year thereafter. If you lived to be 100 years old in 2080 (which will be more common by then), your scheduled benefits could be reduced by 30 percent from today's scheduled levels. See the 2006 Trustees Report.

Q.

Should I count on Social Security for all my retirement income?

A.

No. Social Security was never meant to be the sole source of income in retirement. It is often said that a comfortable retirement is based on a "three-legged stool" of Social Security, pensions and savings. American workers should be saving for their retirement on a personal basis and through employer-sponsored or other retirement plans.

calculator Get an estimate of your retirement benefit using our calculators Social Security's Assets

Q.

Does Social Security have dedicated assets invested for my retirement?

A.

Social Security is largely a "pay-as-you-go" system with today's taxpayers paying for the benefits of today's retirees. Money not needed to pay today's benefits is invested in special-issue Treasury bonds.

Q.

Is there really a Social Security trust fund?

A.

Yes. Presently, Social Security collects more in taxes than it pays in benefits. The excess is borrowed by the U.S. Treasury, which in turn issues special-issue Treasury bonds to Social Security. These bonds totaled $1.9 trillion at the beginning of 2006. Social Security received $94 billion in interest from bonds in 2005. However, Social Security is still basically a "pay-as-you-go" system as the $1.9 trillion is a small percent of benefit obligations.

Social Security`s Future

Q.

I hear that Social Security has a big financial problem? Why?

A.

Social Security's financing problems are long term and will not affect today's retirees and near-retirees, but they are very large and serious. People are living longer, the first baby boomers are nearing retirement, and the birth rate is low. The result is that the worker-to-beneficiary ratio has fallen from 16.5-to-1 in 1950 to 3.3-to-1 today. Within 40 years it will be 2-to-1. At this ratio there will not be enough workers to pay scheduled benefits at current tax rates.

Q.

What will happen if Social Security is not changed?

A.

If Social Security is not changed, payroll taxes will have to be increased, the benefits of today's younger workers will have to be cut, or massive transfers from general revenues will be required. Social Security's Trustees state, "If no action were taken until the combined trust funds become exhausted in 2040, much larger changes would be required. For example, payroll taxes could be raised to finance scheduled benefits fully in every year starting in 2040. In this case, the payroll tax would be increased to 16.65 percent at the point of trust fund exhaustion in 2040 and continue rising to 17.78 percent in 2080. Similarly, benefits could be reduced to the level that is payable with scheduled tax rates in every year beginning in 2040. Under this scenario, benefits would be reduced 26 percent at the point of trust fund exhaustion in 2040, with reductions reaching 30 percent in 2080.” See the 2006 Trustees Report.

Q.

How big is the future problem?

A.

Social Security is not sustainable over the long term at present benefit and tax rates without large infusions of additional revenue. There will be a massive and growing shortfall over the 75-year period.

Social Security's Chief Actuary projects that in present-value dollars the financial shortfall (or unfunded obligation) for the 75-year period is $4.6 trillion. This unfunded obligation indicates that if an additional $4.6 trillion had been added to the trust fund at the beginning of 2006, the program would have had adequate financing to meet the projected cost of benefits scheduled in current law over the next 75 years. See the 2006 Trustees Report.

Q.

If Social Security's financial problem is so long term (negative cash flows not until 2017 and trust fund exhaustion in 2040), why do we need to fix it now?

A.

As the Trustees of Social Security, the Comptroller General of the United States and the Chairman of the Federal Reserve Board have said, the sooner we address the problem, the smaller and less abrupt the changes will be. The independent, bipartisan Social Security Advisory Board has said: "As time goes by, the size of the Social Security problem grows, and the choices available to fix it become more limited." Addressing the problem now will allow today's younger workers planning for their retirement to have a better assurance of the future of Social Security. See the 2006 Trustees Report. Trustees report 2006 Trustees Report Social Security Modernization

Q.

What are the alternatives for modernization and reform?

A.

The four basic alternatives that are being discussed -- singularly or in combination with each other -- are (1) increasing payroll taxes, (2) decreasing benefits, (3) using general revenues or (4) prefunding future benefits through either personal savings accounts or direct investments of the trust funds.

The independent, bipartisan Social Security Advisory Board examined many options that addressed Social Security's long-range solvency problem. Their July 2001 report and an updated actuarial memorandum are available online in pdf format. Get Accessible Adobe Acrobat Reader

Q.

Does President Bush have a specific plan to modernize and reform Social Security?

A.

No, but in his 2005 State of the Union message, the President laid out basic principles to guide reform:

   * We must make Social Security permanently sound, not leave it for another day.
   * We must not jeopardize our economic strength by raising payroll taxes.
   * We must ensure that lower income Americans get the help they need to have dignity and peace of mind in their retirement.
   * We must guarantee that there is no change for those now retired or nearing retirement.
   * We must take care that any changes in the system are gradual, so that younger workers have years to prepare and plan for the future.
   * We should make Social Security a better deal for younger workers through voluntary personal retirement accounts.

The bipartisan commission he appointed in 2001 put forward three models based on these principles. These models are in the process of being discussed, as are other alternatives.

Q.

Will Social Security be replaced by a private sector retirement plan ("privatization")?

A.

No. There are no credible plans to replace Social Security as the foundation for the retirement of American workers.

Q.

What is a voluntary personal retirement account?

A.

There are many possible ways to structure personal accounts. Several proposals recommend that a personal savings account plan for Social Security be modeled after the federal government's Thrift Savings Plan (TSP). This very popular plan for federal employees and members of Congress allows a choice of five highly diversified, low-cost mutual funds. In the TSP, no direct investments in individual stocks are allowed. Later this year the TSP will be adding a new choice—a lifecycle fund that automatically reduces a person’s investment in equities as he or she grows older.

Q.

I understand that some reform plans require larger transfers from general revenues to fund personal Social Security savings accounts. Is that true?

A.

Yes. Many of the plans put forth, including those by the Commission and by some members of Congress, require significant transfers from general revenues. Depending on the underlying assumptions, these transfers generally range from less than $1 trillion to more than $2 trillion, in today's present-value dollars. However, it is also true that if no changes are made, revenue transfers totaling $4.6 trillion, in today's present-value dollars, would be needed to pay currently scheduled benefits over the next 75 years. The amount needed to assure permanent solvency over the infinite horizon is $13.4 trillion.

Q.

Would a "lock box" fix Social Security's problems in and of itself?

A.

No. As Social Security's Chief Actuary has stated, "The implementation of a Social Security 'lock box' would not alter the U.S. Treasury commitment and thus would have no direct effect on the future solvency of Social Security. However, if the effect of a 'lock box' were to require that the non-Social Security Federal budget be in balance or surplus for the years in which Social Security makes investments, then the amount of borrowing from the public might be reduced. In this case the difficulty of generating General Revenue for the redemption of Trust Fund investments in the future would likely be diminished."

Global Aging

Q.

Social Security's future challenges are caused by the aging of our population. Do other countries have similar problems?

A.

Yes. Most countries in Europe, as well as Japan, have more serious challenges than the U.S. Even some developing countries are starting to face up to the aging of their populations. See SSA’s monthly publication International Update for recent developments in the public and private pension systems of other countries.

Q.

What are these other countries doing to face their challenges?

A.

Many of these countries have begun to prefund their social security plans. More than 30 countries, including Britain, Australia and Sweden, have established versions of personal accounts.

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Last reviewed or modified Tuesday May 02, 2006 Need Larger Text?

Perspectives

As a way of starting a deeper conversation around Social Security, please post your "Perspective" below. Each Perspective should be formatted as follows:

"I am _______, and I believe _______."

This will give us a clear structure for looking at all the diverse and interesting perspectives we all hold. If you have something to add, or want to put your own weight behind another's perspectives, go ahead and add some comments beneath their entry.

EXAMPLE: "I am a retiree, and I believe we should cut back the military budget to continue funding Social Security."

EXAMPLE: "I am a former Vice President, and I believe we should put some money in a "lockbox."

EXAMPLE: "I am a mother of two, and I believe we all have to sacrifice to ensure a future for our children."

Let's keep this civil, thoughtful and friendly... and have fun!

What's YOUR perspective?

Remember to "sign" your comment with four tildes

• I'm a twenty-six year old mechanical engineer, and I believe participation in Social Security should be voluntary.

• I am a thirty year old Librarian, and I believe that Social Security should be phased out, or at the very least optional. It's sad to say that I can work for twenty years, die with no children, and that money would revert to the government instead of my surviving family members. I earned it, I should keep it.

• I'm a 26 year old web/software application developer and I don't believe it's the government's job to take my income and tell me how to invest it for retirement. I can better invest my own money than the government can. It's called "personal responsibility" and Social Security should be phased out.
  • You are a responsible and smart person. Do you think everyone else is? I (unfortunately) do not think everyone would be so wise and cautious and invest the money they have now in their future. Sad... Nettco 23:11, 6 July 2006 (UTC)

• I am a thirty-nine year old Independant and I beleive that we need to retain social security as not all individuals are disciplined in saving for retirement and this program is needed as a "safety net" so these individuals do not fall to poverty when they can no longer work and then become more of a tax burden for others.

• I am a 19 year old college student and I believe Social Security will be long-gone by the time I'm old enough to retire (whatever age that may be by then).

• I am a 38 year old goverment employee and I believe the Moral Imperatives of Government cover taking care of its citizens when they are no longer capable of taking care of themselves.

• I am a 20 year old college student in Alabama, and I believe that Social Security should be restructured as a welfare program only for those elderly who are unable to support themselves, if not done away with entirely - private charity is always more efficient, but less guaranteed - and should be handled on the state level if possible. Rather than keeping two accounts with a one-way transfer from SS to the general fund, the funds would be better coming from the general fund in the first place. -Jjensenii 22:15, 7 July 2006 (UTC)

• I think opening social security to the stock markets would be a terrible mistake. I currently day trade, and have been investing for some time now. At times it is hard enough to keep your shirt trading your money for those who are experienced. We don't need to lead countless people into situations where they let their retirement plans ride on market conditions which can change drastically from one minute to another.

• I believe that Social Security was originally developed around the life expectancy. Our life expectancy however has increased. This puts tremendous strain on social security. I think the age limit should be raised over 70 for Social Security benefits. If people want to retire at 65 or earlier, they can open a Roth IRA and 401k and save/plan for it. Without raising the age, we are letting those retiring take advantage of the system and the younger generation (including endangering their future retirement plans), neither of which is fair.

• I'm a High School student and i believe that it is my responsibility to save for retirement not the government's. The idea that I am not capable of doing that for myself is insulting especially since the government is running it so incompetently. I will most likely never see the fruits of my social security tax.

• I'm a 30 year old military member and civil servant. I believe that social security is broken, it has been for many years. The current system will not have enough money to pay me anything significant when I need it. In fact, I see it as the government stealing money out of my paycheck, and giving it to someone else. The system should be phased out as soon as possible. Americans need to take some initiative and prepare for their own retirement. If they cannot, then they will not retire. Either way, I'll be taken care of in retirement - because I will take care of myself.

• I'm a 21 year old college student, and I believe that social security would be much better off if instead of limiting the total income that can be collected upon to $90,000 if it were raised to a higher number, say $180,000. Personally, I don't feel a bit bad about paying SS. The money actually doesn't go to my future...in fact it'll go to my parents and grandparents and the people of their generation. This is an important social contract to me, as I owe so much to their generation(s).

• I'm a university graduate student and I believe that it is somewhat ridiculous that the wealthiest Americans get larger Social Security checks than the poorest. Social Security was designed to be insurance against living out old age in poverty, not as a retirement program. I believe that if SS is granted only to the elderly or disabled who would otherwise be in danger of falling into poverty, not only would SS taxes be able to be reduced and the program still be sustainable into the future, but more money would actually go to those who need it most. I find it doubtful that such a state will ever come into being however, as most people will likely take the stance that they pay into it so they should get something back out of it. I think it would be easier to think of SS as a civic duty rather than an entitlement if it went to those who needed it most. I also find it very strange that if you work for a railroad company you do not have to pay any SS taxes at all, paying into the much better managed railroad retirement fund instead. Thediviner 05:19, 7 July 2006 (UTC)

• I'm a 24 year old video game programmer. I wasn't offered a choice to sign up for social security. I cannot opt out. I don't believe it will be around by the time I retire. Money I could be using to secure my retirement simply vanishes into the wallets of a demographic who votes more than my demographic.

• I'm a 24 year old Economics graduate. Social Security is a broken program. We are going to face big problems in the future and change needs to be done ASAP. The number of employees paying retirees will greatly diminish when the baby boomers go into retirement. It should be more along the lines of a private saving program that you can opt out of. This way people who save up on social security can use this wealth to reinvest in their lives of transfer it to children if they happen to pass away. Under the current system this is not possible. There also needs to be more oversight on what is done with Social Security suprluses every year. Congress is susposed to save on to this to fund years that have deficits but instead politicians have been using it to fund other pet projects and writing an IOU so to speak to the American public. Choice is best!

• I'm a 22 year old programmer. Social Security is a regressive tax that unfairly penalizes less wealthy Americans. A lot of the money doesn't even go into paying social security. Why should people receive extra money just because they are over 65? If people want a safe way to save for retirement, they should buy t-bonds. If the t-bond offerings aren't appropiate, I suggest the treasury should issue better bonds.

• If we want to redistribute wealth within our society through federal programs, I think there are better ways. For instance, we could payout a certain amount to every American from a percentage of the income tax. Alternatively, we could provide welfare payments or merely tax credits to everyone, who makes under a certain amount. I think such a system would be much more fair.