Could Social Security Vanish in 2032?
According to many economists, the Social Security system will essentially be insolvent before the year 2032, when an estimated 75 million Americans are scheduled to begin receiving benefits from the program.
To really understand the gravity of this potential economic disaster, you need to know a little history about Social Security.
President Franklin Roosevelt introduced the Social Security Act in 1935 to provide income for the elderly and disabled.
Roosevelt promised that participation in the Program would be completely voluntary (it’s not). He also promised that the participants would only have to pay1% of the first $1,400 of their annual incomes into the Program.
They now pay 7.65% !
The Social Security Act also provided that the money the participants elected to put into the Program would be deductible from their income for tax purposes each year.
Of course, today the tax is no longer deductible!
The original Program also provided that the money the participants put into the independent ‘Trust Fund’ rather than into the general operating fund, and therefore would only be used to fund the Social Security Retirement Program, and no other Government program.
However, under President Lyndon Johnson, the money was moved to the General Fund!
The original Social Security Act also provided that the annuity payments to the retirees would never be taxed as income.
Now, of course, up to 85% of your Social Security can be Taxed!
You may not know this but Congress has been “borrowing” from the Social Security fund for several years as they believed the fund would never run out of money.
Year after year, both Democrats and Republicans have allowed the party in power to take what they wanted from the Social Security fund and use the money to support their various partisan spending programs.
And, the various administrations have maintained that our budget deficit was lower than it actually was by the exact amount they ”borrowed” from the Social Security trust fund!
So, for example, if they “borrowed” 50 billion dollars from Social Security (which they collateralized by issuing Treasury Notes) they said the deficit was 50 billion less than it actually was!
See, for literally decades, they were not required to account for this “loan” when doing the accounting for the government in terms of relating the true deficit and national debt to American taxpayers and voters.
(This was just recently changed. Now they’ll have to keep the money in the fund, and if they borrow it, they’ll have to actually account for it.)
Anyway, there are lots of proposals out there about as to what to do to correct this shortage of Social Security dollars.
Here are a few that Congress is currently considering:
Letting the taxpayer decide how to invest the funds they pay in to Social Security.
Increase the age limit that you start collecting your Social Security retirement funds.
Limiting or eliminating the amount you can collect if you earn a certain amount of income per year. Don’t forget, this is your money you have paid into the fund!
Increasing the percentage of taxes that are paid out of payroll checks.
Increasing the cap on earnings that the FICA (Social Security and Medicare taxes) tax is based upon.
For example, in 2007, the first $97,000 was subject to FICA tax, with no cap on how much income they can tax for the Medicare portion of FICA.
Whatever they finally agree upon, I don’t believe it will favor the average American wage earner and Social Security contributor.
So, what does this mean to you? It means that you have to structure your retirement plan with a much more conservative approach than ever before! We think you should seriously consider adjusting your retirement plans to either minimize or eliminate Social Security income if you’re not retired yet.
If you are retired, you should have a good hard look at your cash flow, and consider only your non social security income sources as what you need to maintain your lifestyle.
This is a very serious issue that needs to be addressed. Most Americans are depending upon the Social Security system to support their retirement. Remember, workers have been paying into this so called “Retirement” fund all of their working lives.
The problem is that there are much fewer workers paying taxes now than there are retired Americans. And that number is expected to drastically increase!
