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2007 Social Security  Consumer Math
2007 Social Security  Consumer Math
2007 Social Security  Consumer Math
2007 Social Security  Consumer Math
2007 Social Security  Consumer Math
2007 Social Security  Consumer Math
2007 Social Security  Consumer Math
2007 Social Security  Consumer Math
2007 Social Security  Consumer Math
2007 Social Security  Consumer Math
2007 Social Security  Consumer Math
2007 Social Security  Consumer Math
2007 Social Security  Consumer Math
2007 Social Security  Consumer Math
2007 Social Security  Consumer Math
2007 Social Security  Consumer Math
2007 Social Security  Consumer Math
2007 Social Security  Consumer Math
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2007 Social Security Consumer Math

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  • Transcript

    • 1. Unit 9 Social Security
    • 2. Introduction
      • Social Security is a federal program that taxes workers to provide income support for the elderly.
      • Social Security is also the largest social insurance program in the U.S.
        • By making payroll tax payments to Social Security, workers purchase insurance against earnings loss when they die or retire.
    • 3. WHAT IS SOCIAL SECURITY AND HOW DOES IT WORK?
      • Social Security began in 1935, during the height of the Great Depression . The main motivation was to provide a means of support for this unfortunate generation of elderly.
      • Basic structure is that workers (and employers) pay a payroll tax (Salaries) , and the money is used to pay benefits to the current generation of elderly.
    • 4. Program Details
      • Social Security is financed through the FICA tax, which totals 12.4% of gross earnings
      • An individual can collect Social Security as early as age 62, assuming he has paid into the system through the payroll tax for 10 years .
        • Age 62 if you worked past 10 years
    • 5. How Does Social Security Work Over Time?
      • How does Social Security work over time?
        • Social Security is unfunded .
        • This means that taxes collected from a current worker go directly to current retirees.
        • This is referred to as a “Pay-As-You-Go” system.
    • 6. How Does Social Security Work Over Time?
      • There is no guarantee with a pay-as-you-go system that future benefits will be paid out in the way one might expect:
        • The system could go bankrupt.
        • Future generations could refuse to pay to finance the system.
    • 7. How Many People Get Social Security?
      • 47.7 million people receive Social Security each month
      • 1 in 6 Americans get Social Security benefits
      • Nearly 1 in 4 households get income from Social Security
      National Academy of Social Insurance, Social Security Finances: A Primer (2005)
    • 8. Welfare System Who Gets Social Security?
      • 30.0 million retired workers
      • 4.8 million widows and widowers
      • 6.2 million disabled workers
      • 0.8 million adults disabled since childhood
      • 3.1 million children
      National Academy of Social Insurance, Social Security Finances: A Primer (2005)
    • 9. How Much Does Social Security Pay? www.ssa.gov/OACT/COLA/colaeffect.html Type of Beneficiary Average Monthly Benefit All Retired Workers $1,044 Aged widow(er), non-disabled $1,008 Disabled worker $979 Aged couple-both receiving $1,713 Widowed mother and two children $2,167
    • 10. Social Security and Poverty
      • 2007 Poverty Levels
        • Single individuals – $10,210 ($851/month)
        • Married couples – $13,690 ($1,141/month)
      • With Social Security only 9% were poor
        • in 2000
      • Without it, 48% would have been poor
    • 11. Financing Social Security
      • Workers and their employers pay with Social Security taxes
      • Workers pay
        • 6.2% of their earning for Social Security, and
        • 1.45% of their earnings for Hospital Insurance under Medicare (MQFE)
      • Employers pay an equal amount
      • The total is 12.4% for Social Security and 2.9% for Hospital Insurance.
      • Social Security tax base is $97,500 in 2007
    • 12. Worker Benefits
      • Workers over 62 are eligible
        • If they have worked 10 years
      • Benefits are based on a workers earnings history
        • Career-average earnings
        • Average Indexed Monthly Earnings (AIME)
    • 13. Average Indexed Monthly Earnings (AIME)
      • Determine how much the worker earned every year through age 60
    • 14. How do benefits compare to earnings? Retired worker age 65, 2005
    • 15. How many people rely on Social Security for most of their income?
      • 90% of people 65 and older get Social Security
      • Nearly 2 in 3 (66%) get half or more of their income from Social Security
      • About 1 in 5 (22%) get all their income from Social Security
      National Academy of Social Insurance, Social Security Finances: A Primer (2005)
    • 16. Family Benefits
      • Spouses, dependents, and survivors
      • Husband or wife
      • Widow or widower
    • 17. How do actuaries estimate the future?
      • Review the past: birth rates, death rates, immigration, employment, wages, inflation, productivity, interest rates
      • Assumptions for the next 75 years
      National Academy of Social Insurance, Social Security Finances: A Primer (2005)
    • 18. What is that non-taxable income?
      • Income not subject to Social Security taxes includes:
        • earnings above the tax cap ($97,500 in 2007)
      National Academy of Social Insurance, Social Security Finances: A Primer (2005)

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