Is It Time to Just Live With It or Just Live Without It?
There certainly is a lot of ongoing press about the state of our Social Security System. And, just like that old joke about one’s spouse, I think with a couple of tweaks, it’s safe to say the same thing about Social Security. “We can’t live with (funding) it, but, we can’t live without it (retirees and near-retirees).’ In this month’s newsletter I’m sharing a brief history of Social Security System, its funding mandate and my conclusions about one of America’s favorite ‘sacred cows’ -Social Security.
A Brief History of Social Security
Social Security as we now know it emerged as a part of Franklin Roosevelt’s New Deal programs of the 1930’s. The post-depression days of the 1930’s were very tough for most Americans. In fact, more that 50% of our ‘older’ population lived in poverty. In order to take care of our older citizens, Social Security was signed into law on August 14, 1935. Originally enacted as a system that was not meant to be permanent (sound familiar?), for many retired Americans, Social Security has become their largest source of income. In fact, 48% of Americans currently receiving Social Security benefits would be below the poverty level without their monthly check from Social Security.
Current day Social Security benefits and benefit coverages have evolved a lot over the last 70 years. Initially benefits did not extend equally to all citizens. Many workers were excluded from the system due to race, gender and/or job title. Simply put, benefits did not extend equally to all citizens.
- A 1939 change in the law added survivors’ benefits and benefits for the retiree’s spouse and children.
- By 1950, Social Security laws expanded coverage to all non-government workers, including the self-employed.
- 1956 saw the expansion of the program to provide monthly cash benefits for disabled workers and their dependents who have paid into the system, and met minimum work requirements.
- Medicare and Medicaid were established in 1965 under a Social Security reform law.
- In 1983 that civilian federal workers—such as the President of the United States and your Congressional Representatives—were eligible for Social Security benefits.
- 1970’s cost of living adjustments (COLAs) were added to Social Security payments
How was Social Security Supposed to be Funded?
Designed as a pay as you go system, the system was not designed with the idea of creating an individual savings account for each working adult. It is a pool of money held in trust that pays benefits to our retired workers that have met set eligibility requirements. So, although the payment formula allows for payments based upon contribution levels, we are not necessarily supposed to be getting back the dollar amount that we paid into Social Security. Further, the working public and their employers are supposed to be carrying the tax burden for the country’s qualified Social Security recipients.
With our country wallowing in a tremendous amount of debt, large numbers of unemployed workers, many underemployed workers, an ever more vocal group opposing any tax increases and the looming retirements of the Baby Ka-Boomers, many American citizens are plainly fearful of losing or never receiving their Social Security benefits.
While there aren’t any easy answers, I believe that there definitely are government solutions for keeping Social Security practical well past 2035. (2035 is the alleged year that naysayers tell us that Social Security is supposed to be out of money.) But, because our government coffers are weighed down by crushing debt, our legislators have clung to their political planks cheering themselves for failing to compromise and our electorate is (understandably)not fond of paying more taxes, some compromises will need to be made (i.e remove the cap for OASDI ‘taxation’ limits, .raise retirement ages, lower benefit payments).
Most importantly, I think that we as a people need to begin to come up with more of our own answers. We should re-assume more of the responsibility for taking care of our elders and ourselves as we age. Regardless of what we’d like to believe, governments can’t be all things to all people.
After all, Social Security was initiated in the 30’s because over 50% of ‘older’ Americans were below the poverty level. Now 75 years later, 48% of Social Security recipients would be below the poverty level without their monthly Social Security check. Clearly, we as a people have lived through some of the most prosperous years that our nation has ever experienced. Yet, we have not done better job saving for our financial futures. We have come to rely way too heavily on what was meant to be a ‘temporary solution’. Over the decades, our ‘temporary solution’ has become our very own beloved and very necessary ‘sacred cow’ known as Social Security.
Jane Nowak is a CERTIFIED FINANCIAL PLANNER™ specializes in AT&T Retirement Plans, Women’s Retirement and Financial Planning for Women. Located in the Smyrna, Marietta, Vinings area of Atlanta, GA, Jane’s goal is to educate and empower her clients to take control of their daily finances so they can fully fund their retirement dreams and needs. Jane has recently been quoted in and had articles published on-line at the NASDAQ, Yahoo Finance, Womenetics.com, Smart Money Chicks, Fox Business News, CreditCards.com, U.S. News and World Report and Financial Planning Association (FPA) websites.
Securities offered through Triad Advisors, Inc. Member, FINRA/SIPC