Successfully reported this slideshow.
We use your LinkedIn profile and activity data to personalize ads and to show you more relevant ads. You can change your ad preferences anytime.
Unit 9 Social Security
Introduction <ul><li>Social Security  is a federal program that taxes workers to provide income support for the elderly. <...
WHAT IS SOCIAL SECURITY AND HOW DOES IT WORK? <ul><li>Social Security began in 1935, during the height of the  Great Depre...
Program Details <ul><li>Social Security is financed through the  FICA  tax, which totals 12.4% of gross earnings </li></ul...
How Does Social Security Work Over Time? <ul><li>How does Social Security work over time? </li></ul><ul><ul><li>Social Sec...
How Does Social Security Work Over Time? <ul><li>There is no guarantee with a pay-as-you-go system that future benefits wi...
How Many People Get Social Security? <ul><li>47.7 million people receive Social Security each month </li></ul><ul><li>1 in...
Welfare System Who Gets Social Security? <ul><li>30.0 million retired workers </li></ul><ul><li>4.8 million widows and wid...
How Much Does Social Security Pay? www.ssa.gov/OACT/COLA/colaeffect.html   Type of Beneficiary Average Monthly Benefit   A...
Social Security and Poverty <ul><li>2007 Poverty Levels </li></ul><ul><ul><li>Single individuals – $10,210 ($851/month) </...
Financing Social Security <ul><li>Workers and their employers pay with Social Security taxes </li></ul><ul><li>Workers pay...
Worker Benefits <ul><li>Workers over 62 are eligible </li></ul><ul><ul><li>If they have worked 10 years </li></ul></ul><ul...
Average Indexed Monthly Earnings (AIME) <ul><li>Determine  how much the worker earned every year  through age 60 </li></ul>
How do benefits compare to earnings? Retired worker age 65, 2005
How many people rely on Social Security for most of their income? <ul><li>90% of people 65 and older get Social Security <...
Family Benefits <ul><li>Spouses, dependents, and survivors </li></ul><ul><li>Husband or wife  </li></ul><ul><li>Widow or w...
How do actuaries estimate the future? <ul><li>Review the past: birth rates, death rates, immigration, employment, wages, i...
What is that non-taxable income? <ul><li>Income not subject to Social Security taxes includes: </li></ul><ul><ul><li>earni...
Upcoming SlideShare
Loading in …5
×

2007 Social Security Consumer Math

610 views

Published on

  • Be the first to comment

  • Be the first to like this

2007 Social Security Consumer Math

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

×