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Social Security: An OverviewAARP IllinoisJune 2011
AgendaSocial Security: • Basics • Eligibility • Funding • Benefits • Trust Funds • Solvency                   AARP   2
Social Security Defined Social Security established in 1935, motivated because of the Great Depression. Social Security pr...
Benefits Received By Beneficiary Type• Retired – 67.2%• Disabled – 17.7%• Survivors – 15.1%                               ...
Earned BenefitSocial Security is an earnedbenefit. A worker must payinto the system for 40 quarters.Requirements for disab...
Full Retirement Age isIncreasing    Age for Full/Normal Retirement Benefits                 If you were born              ...
Near Universal Coverage  • 94% of workers are covered under   Social Security  • In IL, some state and local govt.   worke...
Social Security Funding Interest     Taxes onearned on     benefitsTrust Fund      3%  assets   15%                Payroll...
2010 Average MonthlySocial Security Benefit  •Retired worker - $1,175  •Disabled worker - $1,068  •Survivors - $994       ...
Social Security Cost ofLiving Adjustment (COLA)• COLA’s based on consumer price  index (CPI-W)• No COLA in 2010 and 2011  ...
Older Americans Dependon Social Security             AARP Public Policy Institute tabulation of the 2010 U.S.   AARP   11 ...
Social Security Helps KeepOlder Americans out ofPoverty  100%   90%                                                       ...
Social Security isImportant for All Incomes     Low Income                   Middle Income                            Uppe...
Worker to Beneficiary Ratio                                                                  AARP   14                 201...
Social Security Trust Funds Who are the Trustees?   •   Sec’y of Treasury   •   Sec’y Labor   •   Sec’y of Health and Huma...
Social Security Trust Funds  • Old Age and Survivors   Insurance Trust Fund (OASI)  • Disability Insurance Trust   Fund (D...
Social Security Trust Funds• Trust Funds track Social Security’s income and outflow of benefits• Trust Funds credited with...
Trust Funds Assets Trust Funds assets must be invested in interest bearing special issue Treasury bonds.                  ...
Trust Funds Assets• As of 2010, about $2.6 trillion of assets in Trust Funds• Trust Funds assets are part of gross/total d...
Trust Funds Assets• Positive Social Security Cash Flow     More Trust Funds debt; Less publically held     debt     Social...
Social Securitys Solvency                                    FACT                                     vs.                 ...
Social Securitys Solvency        2010 Trustees’ Report2015    Benefits exceed income        revenue excluding interest2025...
Key Features of SocialSecurity Program• Earned benefit• Guaranteed life-time benefit protected  from inflation• Higher the...
Solvency Options:Revenue Enhancements• Increase level of earnings subject to  the payroll tax• Increase payroll tax rate• ...
Solvency Options:Benefit Adjustments• Increase the full retirement age• Adjust benefit formula to decrease  benefits for h...
Social Security Campaign                           AARP 26
Social Security: Keep it StrongYou Earned It. Let’s Protect It.                           27
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Social Security by AARP Illinois - June 2011

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Social Security facts and figures. Where AARP stands in the debate over solvency in the coming years and more.

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Transcript of "Social Security by AARP Illinois - June 2011"

  1. 1. Social Security: An OverviewAARP IllinoisJune 2011
  2. 2. AgendaSocial Security: • Basics • Eligibility • Funding • Benefits • Trust Funds • Solvency AARP 2
  3. 3. Social Security Defined Social Security established in 1935, motivated because of the Great Depression. Social Security provides guaranteed retirement, disability and survivor benefits to eligible workers. AARP 3
  4. 4. Benefits Received By Beneficiary Type• Retired – 67.2%• Disabled – 17.7%• Survivors – 15.1% AARP 4 Social Security Administration 2010
  5. 5. Earned BenefitSocial Security is an earnedbenefit. A worker must payinto the system for 40 quarters.Requirements for disabilityand survivor benefits dependon age of disability and death. AARP 5
  6. 6. Full Retirement Age isIncreasing Age for Full/Normal Retirement Benefits If you were born Retirement age in: Year Months 1937 or earlier 65 0 1938 65 2 1939 65 4 1940 65 6 1941 65 8 1942 65 10 1943 54 66 0 1955 66 2 1956 66 4 1957 66 6 1958 66 8 1959 66 10 1960 or later 67 0 Source: Social Security Administration, Social Security Handbook (13th ed.), 1997. AARP 6 Prepared by AARP Public Policy Institute.
  7. 7. Near Universal Coverage • 94% of workers are covered under Social Security • In IL, some state and local govt. workers and teachers participate in alternative retirement system AARP 7
  8. 8. Social Security Funding Interest Taxes onearned on benefitsTrust Fund 3% assets 15% Payroll Taxes 82% AARP 8 Social Security Administration 2010
  9. 9. 2010 Average MonthlySocial Security Benefit •Retired worker - $1,175 •Disabled worker - $1,068 •Survivors - $994 Social Security Administration 2010 AARP 9
  10. 10. Social Security Cost ofLiving Adjustment (COLA)• COLA’s based on consumer price index (CPI-W)• No COLA in 2010 and 2011 AARP 10
  11. 11. Older Americans Dependon Social Security AARP Public Policy Institute tabulation of the 2010 U.S. AARP 11 Bureau of Census Current Population
  12. 12. Social Security Helps KeepOlder Americans out ofPoverty 100% 90% Above poverty 80% 47.3 51.6 70% 54.9 55.7 63.2 60% Above poverty 50% because of Social Security 40% 33.8 30.1 Below poverty 30% 36.2 37.7 20.8 20% 10% 18.9 18.3 16 8.9 6.6 0% AARP Public Policy Institute tabulation of the March 2010 AARP 12 U.S. Bureau of Census Current Population
  13. 13. Social Security isImportant for All Incomes Low Income Middle Income Upper Income 3% 3% 6% 3% 7%5% 26% 37% 20% 87% 70% 34% Social Security Pensions Assets Other 13 Center for Retirement Research; US Bureau of Labor 2009 AARP
  14. 14. Worker to Beneficiary Ratio AARP 14 2010 Annual Report of Social Security Trustees
  15. 15. Social Security Trust Funds Who are the Trustees? • Sec’y of Treasury • Sec’y Labor • Sec’y of Health and Human Services • Commissioner of Social Security • Presidential Appointees (2) What are the Trust Funds? • Accounts in the U. S Treasury to which FICA and SECA tax dollars are credited and benefit payments are debited. AARP 15
  16. 16. Social Security Trust Funds • Old Age and Survivors Insurance Trust Fund (OASI) • Disability Insurance Trust Fund (DI) AARP 16
  17. 17. Social Security Trust Funds• Trust Funds track Social Security’s income and outflow of benefits• Trust Funds credited with tax revenue and interest• Trust Funds debited for benefit payments and administrative costs• Trust Funds assets grow when credits exceed debits. AARP 17
  18. 18. Trust Funds Assets Trust Funds assets must be invested in interest bearing special issue Treasury bonds. AARP 18
  19. 19. Trust Funds Assets• As of 2010, about $2.6 trillion of assets in Trust Funds• Trust Funds assets are part of gross/total debt• As Trust Funds redeemed to pay benefits they become publically held debt AARP 19
  20. 20. Trust Funds Assets• Positive Social Security Cash Flow More Trust Funds debt; Less publically held debt Social Security historically had positive cash flow• Negative Social Security Cash Flow Less Trust Funds debt; more publically held debt• Costs can ONLY be covered if Trust Funds has assets AARP 20
  21. 21. Social Securitys Solvency FACT vs. MYTH• Social Security is NOT in Crisis.• Trust Funds invested in Treasuries and backed by the full faith and credit of the U.S. Government. AARP 21
  22. 22. Social Securitys Solvency 2010 Trustees’ Report2015 Benefits exceed income revenue excluding interest2025 Benefits exceed income revenue including interest2036 Trust Funds assets are exhausted – Social Security must rely solely on tax revenueAfter Continued reduced benefits2036 paid AARP 22
  23. 23. Key Features of SocialSecurity Program• Earned benefit• Guaranteed life-time benefit protected from inflation• Higher the contribution, higher the benefit• Progressive benefits AARP 23
  24. 24. Solvency Options:Revenue Enhancements• Increase level of earnings subject to the payroll tax• Increase payroll tax rate• Tax salary reduction plans in same manner as 401(K) plans AARP 24
  25. 25. Solvency Options:Benefit Adjustments• Increase the full retirement age• Adjust benefit formula to decrease benefits for higher earners• Change basis for annual COLA• Means-test to eliminate benefit for highest incomes• Longevity indexing of full retirement age AARP 25
  26. 26. Social Security Campaign AARP 26
  27. 27. Social Security: Keep it StrongYou Earned It. Let’s Protect It. 27
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