Happy 80th anniversary Social Security!
On August 14, 1935, President Franklin D. Roosevelt signed the Social Security Act into law. This was in the middle of the Great Depression and the goal was to protect citizens against job loss and poverty during old age.
"Today, a hope of many years standing is in large part fulfilled. We have tried to frame a law which will give some measure of protection to the average citizen and to his family against the loss of a job and against a poverty-ridden old age."
President Franklin D. Roosevelt
In 1938, 78% of Americans approved of the Social Security system.
The Social Security Administration's slogan for this anniversary is "Celebrating the Past and Building the Future".
I surveyed my friends to see what they know about Social Security. Outside of the fact that “it is a check you receive when you retire", they didn't know much. The system is a little more complex than that and is designed to be more than a check paid out during retirement.
As we celebrate this 80th anniversary, I thought it befitting to shed some light on the institution.
What is Social Security?
Social Security is a government system instituted in the U.S. to help protect the most vulnerable members of society from living in poverty. The system provides monetary benefits to retirees, disabled individuals, and potentially their families.
The system is funded with the payment of Social Security tax. In 2015, both employers and employees pay 6.2% each (up to the earnings cap of $118,500) into the system. So, if your earnings are $118,500 or more for the year, both you and your employer pay $7,347 in Social Security tax (that’s $14,694 total). The monies collected are paid out to those receiving benefits. It is estimated that one in four households receive Social Security benefits.
You should review your earnings statement annually. Click here to request yours.
NOTE: If you are self-employed, your tax rate is 12.4%.
What does the future hold?
Although we do not have crystal balls, a Gallup Poll released on August 13, 2015, indicates Americans doubt the stability of the system.
- 51% of non-retirees doubt they will receive Social Security benefits
- Those who have retired are worried their benefits will be cut
- Two-thirds of those surveyed believe Social Security is in crisis or has major problems
In reading the results of the Gallup Poll, I found it both interesting and alarming that only 17% of the respondents between ages 18 to 29 believe the system is in crisis versus 33% of the respondents between the ages of 30 to 49.
The Social Security Administration estimates that the system will not be able to pay full benefits effective 2034. As it stands today, the system is in crisis of not being able to fulfill it's mission within the next 19 years. Ultimately, this means we should not depend solely on Social Security as a means to retire comfortably. The younger you are, the more time and responsibility you have to save now. You owe it to your future self and your loved ones.
I'm looking forward to reading your thoughts.
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