Social Security may be in need of some adjustments in order to be sustained into the future.
This is due to our population’s life expectancy increasing and the retirement of many baby boomers.
‘The trend certainly appears to be that the Social Security program will have to be adjusted to ensure that it will remain in some form moving out to the 2020 time period and beyond,’ said BGSU finance chairman, Dan Klein.
According to the Congressional Budget Office’s report, it is projected that in 2012 ‘Social Security, Medicare, and Medicaid would account for almost 70 percent of all non-interest expenditures.’
Those projections were made in 2002 and don’t include costs for Medicare Plan D – the new prescription drug plan – and interest on the federal debt.
‘If these projections come true, Medicare, Social Security, and interest will soon chew up the entire federal budget, leaving nothing for roads, destroyers, national parks, etc.,’ said Francis Laatsch, associate professor in the finance department. ‘So there really is a problem brewing ‘hellip; a big problem.’
Social Security benefits are received by retirees through payroll taxes deducted from current workers and their employers.
Klein projects that more money will be going out of social security than money going into the program near 2020.
‘Sometime before 2020, the amount of money being paid out to retirees will be greater than the amount being paid in by workers, and about 20 years after that the Social Security system will go broke,’ Klein said.
Klein and Laatsch agree that changes in Social Security need to be made in order to ensure that current students will have Social Security when they retire.
Both believe the age at which Social Security benefits can be reaped will be raised from the current age of 60 and that taxes to fund Social Security will be increased.
‘I am willing to predict that the normal retirement age under Social Security will soon be raised to 70,’ Laatsch said. ‘Also, the earnings cap for the payroll tax that funds Social Security will be raised from $90,000 [ in 2005] to, say, $1,000,000. This would be, by far, the largest tax increase [nominal dollar amount] in U.S. history.’
Ohio Congresswoman Marcy Kaptur supports a raise in the earnings cap, according to her spokeswoman Susan Rowe.
‘She supports a raise in the earnings cap to $140,000 from the current amount of $90,000 over a 10 year period,’ Rowe said. ‘And also an increase in FIC tax by a quarter of a percent for the employer and worker.’
Another change Klein and Laatsch agree could happen is the government might ‘means test’ people with large retirement incomes.
‘If you have a certain amount of wealth built up, you might not receive any benefits from the government,’ Klein said.
Another possibility is the amount of benefits can be diminished.
‘The government can lower the level of benefits,’ Klein said.
There are alternatives programs available, so Social Security isn’t the only thing to rely on.
‘Individuals should do as much as they can for themselves to prepare for retirement or disability. Make use of retirement plans such as 401ks, 403bs and IRAs,’ Klein said. ‘The government established these plans to enable individuals to put in either pre- or post-tax dollars and to earn returns that are protected from taxes, at least until the money is withdrawn from the account.’
