Wednesday, March 16, 2005

What's the fuss about? Social Security

copyright LJM 2005

On Social Security---this is what all the fuss is about…..(yeah, it’s a helluva fuss)

Dominican Republic native Demetrio Ortega's earns his keep by the sweat of his brow. His face glistened in the high humidity as he delivered beer to a South Florida merchant Thursday.
However, he worked with a smile on his face.
The 28-year-old Lake Worth resident says he knows his future is secure because he participates in his company's 401K retirement program and looks forward to relaxing in his golden years. He said he knows he can't depend entirely on Social Security.
"That's why I'm trying to do something else. I'm saving money now and I invest my money everywhere," Ortega said.
Coined by some as the 13th Generation or Generation X, those born between 1965 and the very early 80's will miss out on the current idea of retirement, where thoughts of RV-ing or kicking back in the sunshine run rampant--if they are depending on Social Security to get them there.
According to a congressional report on the solvency of Social Security benefits, those born during the 1960s will receive a little over $14,000 annually in social security benefits according to government analysts. Those born during the 1970s will receive approximately $16,400 and those born in the 1980s will pocket about $19,000. The difference is the amount of the social security benefit that is trust fund financed.
According to the report, by the year 2019, the percentage of trust fund contributions to the Social Security program will begin to decline. Although full benefits will be paid, trust fund money will make up less of the percentage. Trust fund financing is important to the solvency of the Social Security program, analysts connected with the report said.
"Outlays are projected to begin exceeding revenues in 2019 with the gap growing ever wider, thereafter," Director of the Congressional Budget Office Dr. Douglas Holtz-Eakin said.
The turning point in the funding structure is that in 2052 the government will be legally bound to pay only a certain amount of the scheduled benefits.
By the year 2053, there will be a 20 percent reduction in Social Security benefits paid because the trust fund contribution balance will be exhausted, government analysts said, unless members of Congress pass laws securing the future of the program.
Analysts also say that by law, the Social Security program can only pay as much as there is in the system.
Members of the Congressional Budget Office compiled the report but do not make the policy decisions on the Social Security Programs, Holtz-Eakin said.
Financial analysts have said retirement formulas have to be adjusted to save popularly for retirement.
"This has been a problem that they have realized for 20 years and Congress hadn't wanted to deal with it because it will make members vulnerable when up for re-election," Florida International University Professor of Finance, Dr. Robert T. Daigler said.
He said people in their 20s and 30 should start saving more or get higher returns on their investments--which means making riskier investments.
"They didn't expect people to live longer. Not only that but returns on stock won't be as high as in the past," he said. He too agreed that financial calculators tooled to help workers save would have to be restructured to reflect changes in social security funding—especially for those born during Generation X.
Daigler said many middle and lower class citizens have difficulty saving money. He also said younger people can recover from financial loss easier than older Americans.
"It puts people who think about it in a bind. They can put more money in an IRA after the age of 50," he said.
Locally, shoppers Thursday at a Delray Beach, Florida strip mall didn't make much of the information released.
"Yeah it bothers me but I don't know. I won't be able to survive. Maybe I'll get some investments," local employee Mary Ford said.
Boynton Beach resident Roni Luc and his wife said they wouldn’t have to worry about old age because of his savings invested in a 401K
"My investments will carry me though," the 30 year-old said.
Over the next 30 years, those born between 1946 and 1964-will rise by more than 90 percent in the next three decades to 69 million in 2030, a report last year said.
Members of Generation X will be the under 65 group who will largely be the ones paying taxes into the program.
That generation, however, will only grow by only about 15 percent-- to 195 million.
However, Social Security is currently running an annual surplus. In 2003, dedicated revenues exceeded money spent out by $68 billion. That surplus helped reduce the government's total deficit in 2003.
Some say by allowing the American boarders to soften, an influx of workers can be brought into the economy who can then help pay into the Social Security system.

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