Social Security

The Future Of Social Security


Publication No. 05-10055
July 1999
ICN 462560



"The last great American achievement of this century should be to strengthen Social Security to help us meet the first great challenge of the next century—an aging nation. "

—Kenneth S. Apfel
Commissioner of Social Security



Will Social Security Be There For You?

Absolutely. The only real question is what kind of Social Security system we will have. Social Security has been a basic part of American life for more than 60 years. The Social Security law has been changed over time to meet the needs of the American people. It will need to change again to meet future challenges.

Today, Social Security provides a minimum "foundation of protection" for retired workers, and for workers and their families who face a loss of income due to disability or the death of a family wage earner. Social Security allows people to live independently and with dignity. About 150 million workers are protected by Social Security, and more than 44 million people receive retirement, survivors and disability benefits from Social Security. You and your family are probably protected by Social Security, and you pay the taxes that help make the system work.

Social Security payments are based on two philosophies. First, the system is designed so that there is a link between how much a worker pays into the system and how much he or she will get in benefits. Basically, high wage earners get more, low wage earners get less. At the same time, the benefit formula is weighted in favor of low wage earners, who have fewer resources to save or invest during their working years. Second, the Social Security program is a way of providing a base of economic security in today's society. It relieves families of the financial burden of supporting other family members by providing a valuable package of retirement, disability and survivors insurance.

Ensuring the future of the Social Security system is important to you ... to your parents and grandparents ... to your children and grandchildren.

This booklet provides some important facts about our Social Security system and the issues involved in resolving the system's long-range financing.

Social Security Has Made An Enormous Difference In The Lives Of Older Americans

Workers can retire as early as age 62 and get reduced Social Security benefits. Or they can wait until full retirement age and receive full benefits. The full retirement age is now 65. But, starting in 2003, it will increase gradually until it reaches 67 for people born in 1960 or later.

More than 9-in-10 retirees now get Social Security benefit payments each month. Only II percent of American senior citizens live in poverty; without Social Security, it would be nearly half.

For two-thirds of the elderly, Social Security is their major source of income. For a third of the elderly, Social Security is virtually their only income.

Social Security also provides older Americans with more than a dependable monthly income with automatic increases tied to increases in the cost of living ... it gives them a measure of deserved financial independence.

Social Security Is More Than
A Retirement Program

Social Security is America's Family Protection Plan. Younger workers and their families receive valuable disability and survivors insurance protection. In fact, about 1-in-3 Social Security beneficiaries is not a retiree.

About 7.5 million people get monthly survivors benefits, and more than six million workers and family members get disability benefits. For the average wage earner with a family, Social Security survivors benefits are equivalent to a $354,000 life insurance policy ... or a $233,000 disability insurance policy.

Social Security Provides A Foundation
On Which To Build Retirement Security

A comfortable retirement has always rested on a three-legged financial stool-Social Security, pensions and savings.

Today, only a little more than half of all workers have employer-sponsored pensions, and people are not saving as much as they know they should. While Social Security replaces about 40 percent of the average worker's pre-retirement earnings, most financial advisors say that you'll need 70 percent of pre-retirement earnings to live comfortably. Even if you can count on a pension, you'll still need to save. If you won't have a private pension, you'll need to save more-and start sooner.

Beginning in October 1999, we will begin mailing a Social Security Statement to workers age 25 and older. This statement will show your earnings history and also give estimates of retirement, survivors and disability benefits provided by Social Security. This statement should help you with your future financial planning.

Changing Demographics Are Driving
The Need For Changes In Social Security

The main reason for Social Security's long-range financing problem is demographics. We're living longer and healthier lives ... and this is good news. When the Social Security program was created in 1935, a 65-year-old had an average life expectancy of 12 more years; today, it's 17 years- and rising.

In addition, 76 million baby boomers will begin retiring in about 2010, and in about 30 years, there will be nearly twice as many older Americans as there are today. At the same time, the number of workers paying into Social Security per beneficiary will drop from 3.3 to 2. These changes will strain our retirement system.

Social Security Is An Economic
Compact Among Generations

Many people think that their Social Security tax contributions are held in interest-bearing accounts earmarked for their own future retirement needs. Social Security is actually an intergenerational compact—the Social Security taxes paid by today's workers and their employers go mostly to fund benefit payments for today's retirees.

Social Security is now taking in more in taxes than is paid out in benefits, and the excess funds are credited to Social Security's trust funds. There is now about $850 billion in the trust funds, and they are projected to grow to more than $4 trillion in the next 20 years. But benefit payments will begin to exceed taxes paid in 2014, and the trust funds will be exhausted in 2034. At that time, Social Security will be able to pay only about three-fourths of benefits owed ... if no changes are made.

Choices Lie Ahead

At the beginning of this decade, the country faced huge federal budget deficits, making it virtually impossible to address such long-term challenges as Social Security. Today, however, we not only enjoy a federal budget surplus for the first time in 30 years, but are projecting federal budget surpluses for many years to come. We could use these surpluses now, or we could use these surpluses to prepare for the challenges of an aging America in the coming century. There are a variety of ways to ensure the long-term stability of Social Security. But each option involves difficult tradeoffs that need to be discussed.

For example, on the benefit side, some people propose that the retirement age for full Social Security benefits should be raised further. They say that Americans are living longer and healthier lives than ever before. Also, people are spending an increasing number of years in retirement. This strains the system. Critics say most Americans now choose to retire early, and that it would be hard for some people to find good jobs or to work beyond the current retirement age because of their health or the nature of their jobs.

On the revenue side, some people believe that Social Security taxes should be paid on all income. They say that the current earnings limit of $72,600 in 1999 allows wealthier Americans to avoid paying Social Security taxes on some of their income. Critics say that Social Security is supposed to be a foundation for retirement planning. If wealthier people contributed more to Social Security, they would have to receive more in benefits—and in some cases much more.

On the investment side, some people support creating individual savings accounts for all workers to supplement or replace part of Social Security benefits. They say that workers would have the potential for more money in retirement than if they rely only on Social Security, and that they could have the freedom to choose how to invest their savings. Critics say that you can get higher returns on investments only by taking higher risks. And they say that if the accounts were a supplement to Social Security, a way to fund them would have to be created. If the accounts were to replace part of Social Security, a lower level of guaranteed Social Security benefits would have to be established.

Some people think the government and not individuals should invest Social Security reserves in the stock market. They say the government is better able to risk a market downturn than are individual workers. Critics say that the government could end up owning a sizable share of private companies.

There are many other options and suggestions being discussed.

If you would like more information on how the Social Security program works and what benefits you may be entitled to under current law, call Social Security's toll-free number—
1-800-772-1213. If you are deaf or hard of hearing, you may call our toll-free TTY number-1-800-325-0778. Or you can visit our website at


Social Security Administration
SSA Publication No. 05-10055
July 1999
ICN 462560



                                                                                          Social Security Return                                  Top Return
                                                       Social Security Return                Top Return