The Future of Social Security

The Future of Social Security

The Social Security Act was enacted by President Franklin D. Roosevelt on August 14, 1935, and it has been one of the country’s most well-known, productive, and well-liked initiatives for eighty-six years (Horan et al., 2019). The wages from which persons pay Social Security payroll taxes serve as the basis for Social Security payments. By paying payroll taxes into Social Security, almost all workers take part in the program, and almost all retirees claim benefits. According to projections from the Social Security Administration, 97 percent of elderly persons (aged 60 to 89) currently receive or will eventually receive Social Security (Horan et al., 2019). All income levels are covered making social security a cornerstone for retirement safety. In addition, social security does not diminish or withhold benefits to those whose salary or possessions reach a specified level. This means social security supports private pensions and individual savings (Horan et al., 2019). Although Social Security has proven an asset for over 80 years, it is now on the brink of disaster. For the first time since its inception in 1935, the Social Security fund is paying more incentives than it is receiving funds, a reality exacerbated by the 2020 COVID pandemic. If this issue is not resolved, experts expect the fund to be empty by 2034. This paper centers on social security system. It examines when and why social security was established, why it is crucial and how it affects retiree poverty rates, the problems social security is currently facing, and solutions to the crisis facing social security. This essay contends that investment-based Social Security reform will boost observed ties between retirement benefits and contributions, hence enhancing economic efficiency. The Future of Social Security

When and Why Social Security was Established

The United States was only beginning to emerge from the Great Depression when Social Security was established. Thousands of individuals were still without jobs, and the elderly and retired Americans who had lost everything became the subject of considerable worry. On August 14, 1935, President Franklin D. Roosevelt ratified the first Social Security Act (Schobel, 2019). The Social Security Board was established by the Act as a new federal body to guarantee that American employees may continue getting paid following retirement. The Social Security program was created with the intention of serving as social insurance, and it still does. The purpose of the state-run initiative was to give Americans financial stability,   support for dependent children, “old age” or pension payments, and unemployment compensation were all included in the original 1935 Social Security Act (Horan et al., 2019). Up until 1940, payments were paid in cash bonuses before a monthly premium system was implemented. Nevertheless, employees paid for it. To invest in the pension and other services they will require in the future, employees paid deposits to a “trust fund” using money taken from their salaries (Horan et al., 2019). The Social Security Administration (SSA) replaced the Social Security Board (SSB) in 1946. (SSA). The Future of Social Security

Why Social Security is Crucial

Social Security oversees a number of initiatives that provide benefits to retirees, workers with disabilities, and their families. Social security is essential given that it offers different benefits. For instance, it ensures that employees receive their retirement benefits. retirement benefits (Hou & Sanzenbacher, 2021). Employees who make contributions to the trust fund are eligible to apply for Social Security retirement benefits at age 66 or 67  to assist with basic living costs and to make up for the loss of earnings from their employment (Hou & Sanzenbacher, 2021).  Although one can start receiving benefits as early as age 62, their payments would be decreased if they do so. Their pension payments will be larger the more revenue they earn and the more Social Security tax they have been paid.

Social security is crucial since it also offers survivors and death benefits. In some situations, an employee’s spouse and children may get monthly payments. If someone passes away or becomes disabled, or if their dependent child becomes disabled prior to turning 22, the family may be entitled to Social Security benefits (Hou & Sanzenbacher, 2021). Additionally, the SSA provides surviving family members with a modest lump-sum death compensation to assist with funeral costs. Social security also offers disability benefits. Benefits for disabled employees who have contributed to the trust fund for Social Security for a specific period of time are available (Hou & Sanzenbacher, 2021). One should be eligible for Social Security disability insurance (SSDI) benefits if they have contributed adequate Social Security taxes and suffer from a severe mental or physical condition that prohibits them from working. The Social Security Act no longer includes coverage for unemployment insurance. However, a joint state-federal initiative is in charge of it. Nevertheless, Medicare, a health insurance initiative for anyone over 65 who has paid Medicare taxes, is currently provided through the Social Security Act (Hou & Sanzenbacher, 2021). Medicare offers healthcare coverage to SSDI recipients who are disabled. The Future of Social Security

How Social Security Affects Retiree Poverty Rates

Formal projections based on the 2021 Current Population Study show that approximately 4 in 10 persons aged 65 and older would receive salaries below the poverty level. At least  16 million elderly people are lifted out of poverty by Social Security income (Mutchler, Li & Xu, 2019). Most elderly persons receive the majority of their income from Social Security. According to several studies including the Census Bureau study, it gives at least 50% of the revenue for nearly half of this population and at least 90% of the income for around one in four older persons (Mutchler et al., 2019). Except for a few at the top of the salary scale, the majority of retirees make small salaries. According to research by the U.S. Census Bureau, the majority of elderly low-income Americans receive far too little, if there is any, social security income. Approximately 60.5 million individuals, two-thirds of who are elderly, are currently getting Social Security payments (Mutchler et al., 2019). This benefit amounts to an average monthly payment of $1,348.49 for current retirees. It may not seem like much, but for 48% of married senior spouses and 71% of single elderly people, Social Security benefits account for half of their monthly salary.

The Problems Social Security is Currently Facing                                                        

A demographic change, specifically the retiring of baby boomers, is one of the main issues Social Security is currently confronting. Over 70 million baby boomers are anticipating their retirement between 2010 and 2030, resulting in a significant increase in the number of eligible recipients (Parrish, 2020). The huge rise in birth rates is just unanticipated by those who designed Social Security. On the other hand, there are just not enough fresh employees to substitute for the retiring baby boomers. The worker-to-beneficiary ratio is anticipated to decrease from 2.8 to as little as 2.1 between 2015 and 2035 (Parrish, 2020). In other words, the payroll tax income received won’t be sufficient to cover the rising benefit payments.

Rising life expectancy is another significant demographic change for the project. The typical American adult’s life expectancy in the middle of the 1960s was around 70 years. The average lifespan had climbed to 78.8 years by the middle of the decade (Parrish, 2020). The increased availability of medical care, greater pharmaceutical alternatives, and enhanced medical awareness are all responsible for this increase in life expectancy. Similarly, the creators of Social Security did not anticipate that life expectancy would increase as much as it has (Parrish, 2020). As a result, individuals are living more than ever and can benefit from Social Security benefits for a longer time frame.

Falling interest rates have been a problem for Social Security that has gone unnoticed.  Interest rates are declining, which has been good for both consumers and companies. Low 15- or 30-year loan rates have made it possible for residents to renegotiate their debts and for new homeowners to acquire properties (Parrish, 2020). Additionally, businesses are able to grow, recruit new employees, and acquire companies at a remarkably low price. The impact of low-interest rates on investors and institutions trying to profit from fixed-income assets has been the reverse. The OASDI particularly invests in a tiny proportion of guarantees of indebtedness and special issue bonds that are only accessible to Trust funds (Parrish, 2020). Bonds earning 3.5% or more will mature in the upcoming years, keeping the Trust invested in special issue securities with low returns that might not exceed the inflationary rate. The less interest revenue the OASDI generates and the faster the initiative would deplete its reserve funds, the lengthier the Federal Reserve maintains rates at historically low levels.

The fact that Congress doesn’t appear to be in a hurry to address what appears to be an impending financial shortage for the plan is the last significant problem for Social Security. The government hasn’t achieved any progress in passing a solution, despite possessing a dozen choices for Social Security improvements, including many ways to increase money through taxation and lower benefits (Parrish, 2020). Consumers will struggle as long as Congress keeps trying to sweep Social Security alternatives under the dirt.



Horan, P., Wise, I., & Horan, T. (2019). The US Social Security System: How It Works, Its Financial Situation, and the Short-Changed Benefits Paid to the Most Vulnerable. Review of Business, 39(1), 15-28.

Hou, W., & Sanzenbacher, G. T. (2021). The Importance of Social Security as an Equalizer. Generations, 45(2), 1-10.






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