Calvert Hall College
Baltimore, Maryland
Teacher: George Kropp
How Does Social Security Reform Affect Me
By: Chris James
11th Grade
In the U.S. today, there is much controversy and debate over Social Security and its reform. Most people are worried that what they pay today will not be available to them in the future. It is a topic which needs to be addressed by the government, and attempts have been made to do so. President Bush has proposed a plan in which people will have a say in how their money is spent. At a part time summer job, a chunk of my income goes to Social Security. There is no say in how that money is invested. It is frustrating to know that this may not be refunded as it is supposed to be. Reform is a way to fix the problem in the Social Security program and ensure that…future…America[ns] will be protected just as [current retirees] are today. The only problem is that this plan of reformation may not work, even if passed. Social Security reform must be successful to ensure a viable retirement program for today’s work force.
The
president has suggested a plan where a portion of the Social Security money is
invested in the stock market and therefore, allows people control of their own
money. He has not had success in getting this passed yet, but it has clear
potential to resolve the problem. People would obviously prefer to control
their own money, as long as it is safe to do so. …
President Bush’s reform has pros and cons. The main pro is that people have more freedom to control a portion of their Social Security money. They have a true say in what happens. People always like the idea of more freedom and a better chance of making more money. President Bush’s plan would definitely have a higher likelihood of resolving the problem thereby making life easier for the people who invest in Social Security.
A con…is higher risk. The average man may not be knowledgeable enough to successfully invest his money. People today invest their…401K’s [and other retirement funds], in the stock market. If a third of a worker’s Social Security funds are put into the stock market, retirees [would] have a large portion of their income dependant on the stock market. If the economy is bad and the stock market plummets, this could be disastrous for many people. In today’s society, with so many people already in debt, the whole idea of changing the Social Security program is frightening. With more freedom comes more responsibility and in turn, greater risk.
The proposal can be looked at and analyzed, but the bottom line is that it is very risky for the stock market to have such a large role in the program. People will enjoy having a more responsible role in the way their money is invested, but they have to understand the pros along with the cons. While it is good to be in control, sometimes we need other people to help us with our financial decisions. This is why the plan has a good chance of not working. If they invest poorly or the stock market crashes, they may not be able to recover quickly, if at all. Their entire income could be drastically affected. This is why I feel the proposal needs to be reassessed. A solution where people have control and more freedom, but in a safe and low-risk environment, is the perfect solution. It is a worthy goal, when trying to propose reform. It would resolve many of the problems and decrease risks. Whether this is possible now or in the future is another topic for debate. The president, as the leader of the government, needs to [make] a serious effort now to make this idea a reality.
Bush has not been successful with his program because of the many cons despite the pros. Politics also come into play as often is the case with any change in government. The president has a long road ahead of him. He has come up with a plan that may not…work. With the high risks and potential problems, it is not the perfect plan. It needs to be altered and improved in order for the government to fix the problem. The current plan is not the solution. There is no perfect solution but in a short time the social security program as we know it could be a thing of the past. We need reform and we need it soon. The current ideas on reform are a starting point for the future.
Answers To Questions Prompted By The Required Reading
1. Explain why some people claim that there are no social security trust funds?
They say this because all of the money that is in the trust fund will have to be paid back by the future generations.
Explain why some people claim that politicians have spent the trust fund money to run the government?
This is said because the government is the decider of how much money goes into the Social Security Trust Fun. They are able to keep certain amounts for other needs.
Explain why some people claim that the trust fund money is invested?
The Social Security trust funds are invested in a type of Treasury bond that can only be issued to and redeemed by the Social Security Administration.
I agree with the fact that the trust fund money is invested. The money does get invested in the Social Security Administration, however, it comes up short of the money needed and the result is a deficit.
2. When U.S. Treasury Bonds are sold where does the money go and what is it used for?
The money stays in the treasuries hands until it is paid out in benefits or other expenses. The trust fund balances are available to finance future benefit payments and other trust fund expenditures.
3. Why do you think that social security is the only source of retirement income for 22% of those over age 65? How would you change that?
It is the only income for 22% because these people can or will not work anymore. They did not plan well enough for the future, or did not have the money to do this. They probably were on a low income and could not save any money when working.
4. What is the average life expectancy of an American over age 65 today?
For males, 17.4 years. For females, 20.8.
5.
What is the average
social security benefit in your state? Is it more or less than the average
benefit of the state with the largest population in the United
States?
The average Social Security check for retired Marylanders is $928 per month. The average for California was $922.
6. In 2003 what was the amount of social security income derived from interest earnings? How much from payroll taxes?
In 2003, 85% was derived from payroll taxes and 2% from income taxes.
7. Who can get full retirement benefits even though they continue to earn income after attaining full retirement age and who cannot? In 2004 what was considered “full retirement age”?
The people who continue to work but do not make more money than the limits can still get full benefits. The age of 65 was considered full retirement age in 2004.
8. Give two examples of “special payments”.
Two examples are vacation or sick pay.
9.
What benefits does social security provide to people who have not yet reached
retirement age?
Disability is a benefit one can receive before retirement. They must be declared as disable by the Social Security Administration. Survivor benefits are also available to widows, widowers, and the surviving children.
10. How long does it take a worker under age 24 to be qualified to receive social security benefits?
At age 62 they would begin to receive benefits, so it would take 38 years.
11. Do you think the social security system needs to be reformed now?
Social Security desperately needs to be reformed. There is a deficit forming in the Trust Bonds every day. In addition, more people are going to be eligible for S.S. because of the baby-boomers. This will make the deficits even more significant.
12. If you could opt out of the social security system and invest the portion of your pay that would otherwise be invested for you, would you choose to do so? Why or why not?
If I did not have a need for it, I may be tempted to do this, but I don’t think my small investment would do anything to help the drastic problems. The deficits are too large for one person to fix.