Social Security Benefits

A call for reform on the Social Security system

By Karen Ellis

The biggest misconception about the Social Security system is that individuals have an account comprised of their payroll deductions. In actuality, the 6.2 percent deduction from an employee’s payroll and the 6.2 percent paid by employers are put into Social Security trust funds. That money is paid out to elderly or disabled Americans currently receiving benefit checks. When the Social Security Act was signed into law in 1935, there were already many people in need of benefits. The plan began with the use of current Social Security deductions paying for those in current need of benefits.

Individuals must be or are expected to be completely disabled for one year in order to qualify for Social Security benefits. Those nearing retirement should contact their local Social Security office to determine the age of qualification. Be sure to have your Social Security card or Social Security number available.

The Need for Reform

Our country is currently facing a Social Security crisis because of the following:

  • A larger current population entering retirement age and requiring benefits.
  • A smaller population comprising the future workforce.
  • In just 12 years, Social Security is planned to be paying out more than it takes in.
  • Past overage collection of Social Security funds has been spent on other governmental needs rather than saved for future use.

Proposed Social Security Reform

It has been suggested that higher Social Security taxes be required from future workers. This is not the best solution to the problem for two reasons. The high rate of deduction is already keeping individuals from saving additional money for retirement. Currently, few people are able to live solely on their benefit check. Secondly, the rate of return on the money paid into the system is extremely low. The increase of payroll taxes would also burden small businesses by raising the percentage paid for each employee.

Others propose real reform is the only true fix for the Social Security crisis. A personal retirement account would allow current employees a higher return in retirement funds than Social Security.

Impact of Reform on Small Business

Initially the personal retirement account sounds like the answer to our Social Security woes. However, for small businesses, the benefits depend on the administering of the plan. It could cost more due to a higher level of paperwork and legal red tape. This could mean hiring more employees to handle the complexities and extra workload. After all, this would be a huge governmental undertaking with Social Security currently impacting 96 percent of the U.S. workforce. Yet, those proponents of the forthcoming reforms argue that added work and cost to small businesses is unnecessary if the program is handled well.

For further information regarding the Social Security system contact the Social Security Administration, http://www.ssa.gov/.