I’m a recent college graduate with my first “real” job. With that comes paying into the Social Security System. My concern is whether or not there will be funds for me someday, especially in light of the recent deficit report.
Dear Worried Millennial,
First, I am impressed with a number of things about your question: first, that you are curious about the Social Security system and second, that you are aware of the out-of-control federal deficits. For far too many people, young and old alike, their contributions to Social Security are out of sight and out of mind.
Will Social Security Go Broke?
You’re hitting on a hot topic. Many fear that the money to fund America’s Social Security program will run out and a large portion of our population will be negatively affected. The money for this benefit comes from three sources:
- 88% from the Social Security tax
- 4% from income taxes recipients pay on their benefits
- 8% from interest on money in the trust funds
Some of the concerns voiced by people like you include:
The Funding Issue
Money raised by Social Security taxes is invested in non-marketable securities. These trust funds are projected to run out by around 2034. But, with the tax continuing to raise money, the program is projected to cover nearly 80% of its obligations through 2090. Despite the fact that the fund could be depleted by 2034-35, the program could still pay out what it takes in from Social Security taxes. This would pay an approximate 80% of the benefits for retired and disabled workers.
The Changing Population
Families are continuing to get smaller. Lower birth rates mean fewer people will be paying into the system. People are living longer than when the program was first started so they are collecting more money. This means more money will be needed for the program but fewer and fewer workers will be paying into the fund.
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SOURCE: Christian Post, Chuck Bentley