Social Security Today and Tomorrow

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Details on the current state of Social Security and proposals being considered in Washington. Facts, Figures, Analytics.

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Social Security Today and Tomorrow

  1. 1. Facts & Challenges Social Security was signed into law in 1935, to ensure that seniors would have a steady and guaranteed source of income when they retired. The first payments were made in 1937 – to just 53,236 Americans. Now a little over 58 million Americans receive Social Security benefits. Let’s take a closer look at what makes this program vital to so many people and to our economy. http://www.ssa.gov/cgi-bin/currentpay.cgi
  2. 2. • You need to work at least 10 years to become eligible for retirement benefits • You earn Social Security credits when you work in a job and pay Social Security taxes • Only legal residents can collect Social Security benefits. Who is Eligible for Social Security? Social Security is an Earned Benefit
  3. 3. Retired Workers 65% Disabled Workers 16% Widows & Parents 7% Children 8% Spouses 4% Who Receives Social Security? In 2013, 58 million Americans received Social Security benefits.
  4. 4. • Provides more than half of family income for almost 1/2 of all seniors • Provides almost all family income for about 1/4 of seniors • 44% of Illinoisans 65+ are kept out of poverty by Social Security A Vital Source of Income for Seniors Keeps 15 Million Seniors Out of Poverty
  5. 5. Critical for the Economy Social Security Benefits Support Economy & Jobs 9.2 Million Jobs Supported $1.4 Trillion Added to the Economy
  6. 6. 10 15 20 Social Security Challenges 65-year-old could expect to live nearly 20 more years today
  7. 7. 0 5 10 15 20 25 30 Social Security Challenges Birth rate fell from about 25 per 1,000 people to under 13
  8. 8. 0 1 2 3 4 5 6 7 8 9 Social Security Challenges Number of workers per beneficiary will decline to 2.1 in 2033
  9. 9. 5 Proposals Being Talked About in Washington
  10. 10. Proposal on the Table in Washington: Raise the Full Retirement Age (FRA) • Has been increasing since 2000 • Currently 66 & will be 67 for those born 1960 and later Currently: 66-67 • Increase by 2 months each year from 2023 - 2028 • Estimated to fill 16% of gap Proposal: 68 • Increase by 2 months each year from 2023-2040 • Estimated to fill 44% of gap Proposal: 70
  11. 11. Raise the Full Retirement Age: Argument For (Romina Boccia)  All Americans are living longer but Social Security has not kept pace  Between 2000 and 2010, life expectancy increased by 1.7 year for white and African- American men; by 1.8 years for African American Women; and 1.2 years for white women  Increasing the FRA slightly and predictably is a fair and commonsense approach to improve Social Security’s finances
  12. 12. Raise the Full Retirement Age: Argument Against (Virginia Reno)  Increasing the FRA is an across the board benefit cut  The FRA is already increasing to age 67 for people born in 1960 or later  Most gains in life expectancy over last 30 years have gone to higher earners  A higher FRA would greatly disadvantage low- paid and minority workers who, on average, have seen little or no gain in life expectancy
  13. 13. Proposal on the Table in Washington: Recalculate the COLA Chained Consumer Price Index • Aims to account for change in consumer buying habits when prices change • Predict annual COLA on average 0.3% points lower under this • Estimated to fill 20% of gap Elderly Index • Aims to reflect spending patterns of older Americans (including health care) • Predict annual COLA on average 0.2 higher under this • Estimated to increase gap by 14%
  14. 14.  Social Security should use the most accurate and up-to-date index to protect benefits from being eroded by inflation  Benefits would continue to rise with inflation under the chained CPI  CPI-E (elderly index) should not be used because 1) it is less accurate, 2) people of all ages receive benefits, and 3) it would worsen Social Security’s financial problems Recalculate the COLA: Argument For Chained CPI (Romina Boccia)
  15. 15.  An elderly index (CPI-E) provides a more accurate measure of inflation for older people because it reflects their buying patterns  A Chained CPI is not more accurate for older Americans because it doesn’t fully account for their higher spending on health care  The benefit cut of a chained CPI would compound over time causing the oldest beneficiaries, who are heavily reliant on Social Security, to experience the biggest cuts Recalculate the COLA: Argument For Elderly CPI (Virginia Reno)
  16. 16. Proposal on the Table in Washington: Increase the Payroll Tax Cap Cap covers about 83% of total earnings in nation Payroll tax currently applies to annual earnings up to $117,000 Any wages above $117,000 go untaxed 83% Proposal to raise cap to cover 90% of total earnings in nation Would apply to annual earnings up to about $247,500 in 2015 Estimated to fill 28% of funding gap 90%
  17. 17.  Restores the intent of Congress when it set the tax cap to include 90% of covered earnings in 1977  Only 6% of workers affected  Would make Social Security financing more fair by requiring top earners to pay more into Social Security Increase the Payroll Tax Cap: Argument For (Virginia Reno)
  18. 18.  A hefty tax increase that will hit middle income taxpayers and hurt the self-employed and certain small business owners  Only delays Social Security’s cash-flow problems by eight years while allowing Congress to spend more right away  The historical average covers 83 percent of earnings—90 percent is an anomaly that only occurred once in 1983 Increase the Payroll Tax Cap: Argument Against (Romina Boccia)
  19. 19. Proposal on the Table in Washington: Eliminate the Payroll Tax Cap Cap covers about 83% of total earnings in nation Payroll tax currently applies to annual earnings up to $117,000 Any wages above $117,000 go untaxed 83% Proposal to eliminate the cap The payroll tax rate would apply to ALL earnings Estimated to fill 70% of funding gap 100%
  20. 20.  Would equalize the tax rate so all workers pay the same percentage (6.2%) on their earnings.  Only 6 percent of workers affected  Would eliminate much (70%) of the financing gap  Improves fairness and would reduce income inequality Eliminate the Payroll Tax Cap: Argument For (Virginia Reno)
  21. 21.  Would either cause huge checks for the very wealthy or break the link between earnings and benefits.  Annual benefit payments for millionaires could reach over $150,000  Marginal tax rates in some states would go to 68 percent—some people would see more than two- thirds of earned income taxed away  Congress would spend surpluses immediately, increasing deficits and the debt for future generations Eliminate the Payroll Tax Cap: Argument Against (Romina Boccia)
  22. 22.  Benefit payments are based on earnings that were subject to Social Security payroll taxes. Proposal on the Table in Washington: Reduce Benefits for Higher Earners  Higher Lifetime Earners • Receive higher benefit payments • Benefits replace smaller share of past earnings
  23. 23. Proposal on the Table in Washington: Reduce Benefits for Higher Earners Proposal to reduce benefits for highest-earning 50% Gradually over time by sliding scale Up to 28% benefit reduction for maximum earners Estimated to fill 33% of the gap
  24. 24.  A true social insurance program provides a form of protection to those who contribute to the program.  In an era of large budget deficits and high national debt, working generations can hardly afford to pay benefits to all retirees regardless of need.  Social Security should protect all against poverty in retirement by focusing benefits on those who need them the most. Reduce Benefits for Higher Earners: Argument For (Romina Boccia)
  25. 25.  Cutting benefits for higher earners would actually cut benefits for the broad middle class • Highest-earning 25% have average lifetime earnings as little as $59,000 a year • Highest-earning 50% have average lifetime earnings as little as $38,000 a year  These benefit cuts are not warranted. The middle class relies heavily on Social Security. We can afford to preserve and pay for Social Security Reduce Benefits for Higher Earners: Argument Against (Virginia Reno)
  26. 26. Which Options Would You Support to Strengthen Social Security? https://twtpoll.com/3x837ajgpkr9jl2 POLL QUESTION
  27. 27. AARP is Fighting for a Separate Debate
  28. 28. Payroll Taxes 84% Interest 13% Taxation of Benefits 3% 29 Social Security Separate from the Budget Social Security is a self-financed program, not a piggy bank for deficit reduction!
  29. 29. 2015 2025 2033* 2087 100% 100% 77% 72% % of Benefits Paid30 Social Security Can Pay Full Benefits Until 2033
  30. 30.  Take Action: Tell your elected officials to keep Social Security strong for the future!  Go to action.aarp.org/SocialSecurity to send President Obama and your members of Congress a message today! Make Your Voice Heard

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