Social Security Erika Benitez, Blake Gonsalves, Kyle Goto, Hung Nguyen, & Sophy Om
Brief Overview of Social Security l Proposed programs prior to Social Security – Share our Wealth Plan – Townshed Plan – Ham & Eggs – Bigelow Plan – EPIC Plan – General Welfare Federation of America – Technocracy – Social Insurance l l l History of Social Security How Social Security started 1939 Amendment 1950 Amendment Three programs of Social Security – Old Age and Survivors Benefit – Disability Insurance – Supplemental Security Income – Qualification of these three programs – Amount of Benefits
Graphical Analysis The table shows a rough estimate of the benefits you will receive when you are retired. You must have at least 10 years of salary to be eligible for the benefits. Age Of Retirement Income 62 65 66 67 68 69 70 Less than $35, 000 a $4, 786 $5, 925 $6, 381 $6, 837 $7, 384 $7, 931 $8, 478 $7, 896 $9, 776 $10, 528 $11, 280 $12, 182 $13, 085 $13, 987 $11, 131 $13, 781 $14, 841 $15, 901 $17, 173 $18, 445 $19, 717 year $35, 000 to $55, 000 a year More than $55, 000 a year
Social Security Benefits l Maximum Social Security Benefit : Worker Retiring at Full Retirement Age in 2004 is $ 1, 825/mo. (age 65 and 4 months, born in 1939) – An individual with wages equal to or larger than $87, 000 would contribute $5, 449. 80 to the OASDI program in 2004, and the employer would contribute the same amount l All Disabled Workers estimated for 2004 is $861/mo l SSI Benefits for 2004 – Individual = $564/mo – Couple = $846/mo l All Benefits are accounted for 2. 1% COLA for 2004
HOW ECONOMIC AND DEMOGRAPHIC FACTORS AFFECT SOCIAL SECURITY'S FINANCES l The solvency of Social Security's Old-Age and Survivors Insurance and Disability Insurance (OASDI) system is determined by three sets of factors – Demographic – Economic – Political
Major Demographic Assumptions l Major Demographics – Fertility – Immigration – Mortality – Disability
Major Economic Assumptions – Wage Increases – Consumer Price Index (CPI) – Increases in Real Wages – Interest Rates – Labor Force Participation Rates – Unemployment – GDP Growth
Major Political Assumption l Laws passed by Congress that define the structure of Social Security taxes and benefits
Problems with Social Security l “Ponzi Scheme” – Later “investors”, taxpayers, pay back earlier, retired, taxpayer benefits. l Consumer Price Index – Overstating the increase in the cost-of-living will increase the national debt $1 trillion greater in 2008. l Birth rate – With a declining birth rate the number of SS recipients is increasing For more info… www. socialsecurity. org
Presidential Candidates Bio l Three major party candidates: – Bush (Republican) – Kerry (Democrat) – Nader (Green Party) FOR MORE INFO. . . http: //www. issues 2000. org
Ralph Nader’s Plan Social Security is solid l Fears loss in privatization l Replaces certainty with risk l
John Kerry’s Plan No Privatization l No Cutting Benefits l No Extending the Retirement Age l No Solutions? l
George W. Bush’s Plan Personal Retirement accounts for young workers l Move to Privatization l Raise Retirement Age l Reduce Benefits l
Privatization l Personal Property l Possibility of earning more l Market never has lost over a 20 year span
Problems with Privatization l l l Corporation cut Certainty replaced with risk Market crash or scandal Returns could be less than the projected 74% loss Transition cost
Raising Payroll Taxes (Peter Orzag) l Raise payroll taxes to 15% by 2072 l Avoid transaction and commission costs l 9% reduction of benefits
Changing Indexes (Greenspan) l Use “Chained” CPI l 4% reduction in benefits over 10 years
Changing expected benefits l Use CPI to calculate expected benefits l 41% reduction in benefits for those born in 2002
Our Solution to Social Security Increase payroll taxes 1% over next 5 years l Buy more time to do further studies into privatization l
Going Private l Privatize early as possible (time is a friend of interest) l Allow an individual to go fully private instead of partial l Gov and SEC work together to find a brokerage house l Must meet certain strict criteria l Determine type of investments
Questions l Any Questions?
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