Staying Fit
It's Time to Protect Social Security
The longer we wait, the harder it gets. Here are possible solutions from both sides of the political aisle
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THE PROCESS
Money in …
More than 80% of Social Security's revenue comes through the FICA (the Federal Insurance Contributions Act) payroll tax, which imposes a 12.4% tax on income, with 6.2% paid by employers and 6.2% paid by workers. Two other revenue sources: interest earned on reserve funds, and income taxes paid on benefits by higher-income retirees.
FICA revenue that isn't needed immediately is credited to the Social Security Trust Fund and invested in securities issued by the U.S. Treasury to fund government operations. Those bonds are backed by the full faith and credit of the government. When Social Security redeems bonds, that puts pressure on the federal budget.
Money out…
A formula averages and indexes lifetime earnings to determine benefits; the average monthly retiree benefit this year is about $1,180. For 64% of Americans 65 and over, Social Security provides more than half of their income. Total benefits this year: $727 billion.
Raise the retirement age. A gradual increase from 67 to 70 by 2040 would close 65% of the gap.
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Index benefits for longevity by paying lower annual benefits as average life expectancy increases. This closes 21% of the gap and maintains similar total lifetime benefits for each generation. (But lower-income Americans, who have shorter life expectancies, would receive a bigger benefit cut.)
Change the formula for the annual cost-of-living adjustment (COLA). President Obama's deficit commission recommended using a new inflation measure called the "chained" Consumer Price Index, which tends to rise more slowly than the index now used to compute Social Security's COLA.
Option 3: Private accounts
President George W. Bush's proposal in 2005 to partially privatize Social Security by creating IRA-style retirement accounts was defeated, but a small contingent of policymakers and politicians continues to argue for partial privatization or even elimination of Social Security altogether.
Next: Social Security opinions: Everybody's got one. >>
THE OPINIONS
Americans of all ages and political affiliations have told AARP pollsters that they want Social Security preserved in its current form, and 85% of Americans oppose cutting Social Security to reduce the deficit. But there's less agreement on exactly how to keep the program strong.
Senator Bernie Sanders (I-Vt)
"I get a little bit disturbed when I hear folks...talking about Social Security is going broke…'We have to reduce benefits, we have to privatize it, we have to raise the retirement age.' That is all total nonsense."

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THE PROCESS
Money in …
More than 80% of Social Security's revenue comes through the FICA (the Federal Insurance Contributions Act) payroll tax, which imposes a 12.4% tax on income, with 6.2% paid by employers and 6.2% paid by workers. Two other revenue sources: interest earned on reserve funds, and income taxes paid on benefits by higher-income retirees.
FICA revenue that isn't needed immediately is credited to the Social Security Trust Fund and invested in securities issued by the U.S. Treasury to fund government operations. Those bonds are backed by the full faith and credit of the government. When Social Security redeems bonds, that puts pressure on the federal budget.
Money out…
A formula averages and indexes lifetime earnings to determine benefits; the average monthly retiree benefit this year is about $1,180. For 64% of Americans 65 and over, Social Security provides more than half of their income. Total benefits this year: $727 billion.
Former Senator Alan Simpson (R-WY)
"...We've reached a point now where [Social Security is] like a milk cow with 310 million tits!"
Representative Ron Paul (R-TX)
"I'd let [young people] out — just get out of the program, opt out! Restore your freedom, demand your rights to take care of yourself. And then take care of the elderly who are dependent — don't put them out in the streets."

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