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  • Archive for the ‘Blogging with WOW’ Category

    Social Security: Keeping It Strong Now and For the Future

    Friday, June 3rd, 2011

    This blog appeared as a guest post on Wider Opportunities for Women’s blog in honor of Older Americans Month. Check it out here.

    Social Security is a hot topic in the news today. Many are publicly asking: will the system still be here for future generations? While there is a lot that can be done to strengthen the solvency of Social Security, the truth is that it’s not going broke and there are plenty of reasons to maintain it as a strong and sound social insurance program. In fact according to the most recent Trustees Report there was an annual surplus of $69 billion in 2010.

    So here’s the big question: What exactly is the Social Security shortfall and how urgent is the need to fix the system? Key demographic changes do put a more immediate strain on Social Security’s financing:

    • The large boomer generation is beginning to retire, so more people will be collecting benefits. People are not only living longer and collecting benefits for longer periods. For these reasons, Social Security faces a shortfall in about 2036.
    • Without any change, Social Security would only have enough revenue to pay about 75-78% of promised benefits in 2036. The short-fall is about 22-25%.[1]
    • So the system is not “totally broke” or “running out of money”. When people say the system is “totally broke” they are incorrect.
    • However, many agree that although there is no immediate crisis, the longer we delay putting the program into long-term financial balance, the more drastic the changes that will have to be made in the future.

    So what are the current reform proposals currently on the table?

    Current reform proposal options run the gamut from simply tweaking proposals to change revenues and benefits to more dramatic changes of partially privatizing the system into individually invested private accounts.

    The National Commission on Fiscal Responsibility and Reform plan calls for:

    • changing the benefit formula to slow the growth of benefits for many workers,
    • an increase in the retirement age to 68 by 2050,
    • an increase in the payroll tax on upper income Americans,
    • a cut in the annual cost of living increases for Social Security benefits,
    • a resulting reduction in the monthly benefits for most beneficiaries, and
    • a requirement that newly hired state and local government employees be required to pay Social Security taxes.[2]

    Other reform options

    There are others who support a mix of options including tax increases and benefit cuts to put the system on sounder financial footing.

    • Social Security payroll taxes apply to a worker’s earnings only up to a cap—$106,800 in 2011. Others suggest raising the cap so that the payroll tax is applied to 90% of all earnings as was intended when the program was started.
    • Another option is to raise the payroll tax on everyone. A tax increase of about 1% on employees and 1% on employers would eliminate the shortfall.
    • Partial privatization would allow workers to divert a portion of the current payroll taxes into accounts invested in the stock market. The guaranteed benefit under Social Security would be reduced and workers would rely on their accounts to make up the difference.
    • Extend coverage to new workers in state plans.

    Only time will tell how the shortfalls of Social Security will be strengthened. However, it’s important to keep in mind that this is a program that currently provides benefits to over 54 million Americans today. Social Security is the nation’s single most successful social program. Making sure that it continues to provide a foundation of retirement security to American workers should guide any future reform.


    [1] “The 2010 Annual Report of the Board of Trustees of the Federal Old-Age and Survivors Insurance and Federal Disability Insurance Trust Funds.” The Board of Trustees of the Federal Old-Age and Survivors Insurance and Federal Disability Insurance Trust Funds. Referred to the Committee on Ways and Means. 9 August 2010. <http://www.ssa.gov/OACT/TR/2010/tr2010.pdf>.


    [2] The Moment of Truth. Washington, D.C.: The National Commission on Fiscal Responsibility and Reform, 2010.

    Speak Up! Tell an Important Female in Your Life about the Importance of Making Your Money Last a Lifetime

    Wednesday, May 26th, 2010

    In honor of Older Americans Month, Wider Opportunities for Women is hosting their second annual Blog Day. This year’s topic: “America’s Budget Matters (So Does Yours).” We encourage you to share your personal stories on the importance of programs like Social Security, Medicare and Medicaid along with any tips or advice you have to offer on making your money stretch throughout retirement. Leave a comment on our blog or check out WOW’s blog to learn more!

    As women, we can generally expect to live longer than our male counterparts. In fact, women’s life expectancy is now 81.4 years, while men’s is 75.5 years of age. If we want to be able to enjoy our retirement years, one of the biggest requirements is getting a hold on our household budgets and making sure our money will last as long as we do.

    There are other reasons women especially need to be aware of properly managing their finances.  Sixty-six percent of the 65.7 million caregivers in the U.S. are female. This means there are more than 43 million women who are currently providing care for others on a regular basis. If you are not currently providing care to a child, older relative, or dependant, odds are that you will face this situation at some point in your lifetime. Caregiving responsibilities seep into other aspects of life, namely, a caregiver’s ability to work as much as (s)he wants or needs to.  Less time for work can also mean fewer opportunities for promotions and less time for accumulation of retirement plan savings. This means women have to be even more diligent about managing their finances and being aware of how much they will need for retirement! Check out WISER’s special report to learn more on keeping your sources of retirement income in order while caring for others.

    More time spent caregiving also means that Social Security is extremely important for women who had less time to accumulate other forms of retirement savings. Without Social Security benefits, more than HALF of older women alive today would be in poverty. Social Security is also important because it is a progressive benefit, meaning those who earn less and need the benefit more, receive a higher percentage than higher earners. Understanding your individual Social Security statement will further help you estimate your income in retirement and determine how much money you will need to supplement your Social Security benefits later in life. It is important to understand what these benefits will mean for you and your loved ones as you begin planning to retire. WISER’s Financial Planning Workbook dedicates an entire section to explaining the Social Security process and breaking down what this can mean for you and your financial future.

    Lastly, but most importantly, take time to be proactive about your future! Start now by looking at how you are spending and saving your money using some of the helpful budgeting and financial management tools we have linked to above. Also in the name of Older American’s Month remember how much knowledge and guidance our elders can provide for us and have a conversation with your mother, daughter, sister, aunt, or friend about how important it is to save for retirement and plan for your financial future. It’s never too early to start planning for your financial future in order to make your money last a lifetime.

    WISER

    About Us

    WISER is a nonprofit organization that works to help women, educators and policymakers understand the important issues surrounding women's retirement income. WISER creates a variety of consumer publications including fact sheets, booklets and a quarterly newsletter that explain in easy-to-understand language the complex issues surrounding Social Security, divorce, pay equity, pensions, savings and investments, banking, home-ownership, long-term care and disability insurance.

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