The Future of Social Security(Be Sure to Download to See the

Notes!)

Facts &

ChallengesSocial Security was signed into law in 1935, to ensure that seniors would have a steady and guaranteed source of income when they retired. The first payments were made in 1937 – to just 53,236 Americans. Now a little over 58 million Americans receive Social Security benefits. Let’s take a closer look at what makes this program vital to so many people and to our economy.

http://www.ssa.gov/cgi-bin/currentpay.cgi

• You need to work at least 10 years to become eligible for retirement benefits

• You earn Social Security credits when you work in a job and pay Social Security taxes

• Only legal residents can collect Social Security benefits.

Who is Eligible for Social Security?

Social Security is an Earned Benefit

Retired Workers

65%

Disabled Workers

16%

Widows & Par-ents 7%

Children 8%

Spouses4%

Who Receives Social Security?

In 2013, 58 million Americans received

Social Security benefits.

• Provides more than half of family income for almost 1/2 of all seniors

• Provides almost all family income for about 1/4 of seniors

• 44% of Illinoisans 65+ are kept out of poverty by Social Security

A Vital Source of Income for Seniors

Keeps 15 Million Seniors Out of Poverty

Critical for the Economy

Social Security Benefits Support Economy & Jobs

9.2 MillionJobs Supported

$1.4 TrillionAdded to the Economy

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19801990

20002010

20202030

10

15

20

Social Security Challenges

65-year-old could expect to live nearly 20 more years today

19401950

19601970

19801990

20002005

20102012

0

5

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20

25

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Social Security Challenges

Birth rate fell from about 25 per 1,000 people to under 13

19551965

19751985

19952005

20152025

2033

0123456789

Social Security Challenges

Number of workers per beneficiary will decline to 2.1 in 2033

5 Proposals Being Talked

About in Washington

Proposal on the Table in Washington: Raise the Full Retirement Age (FRA)

• Has been increasing since 2000

• Currently 66 & will be 67 for those born 1960 and later

Currently:

66-67

• Increase by 2 months each year from 2023 - 2028

• Estimated to fill 16% of gap

Proposal:

68

• Increase by 2 months each year from 2023-2040

• Estimated to fill 44% of gap

Proposal:

70

Raise the Full Retirement Age: Argument For (Romina Boccia)

All Americans are living longer but Social Security has not kept pace

Between 2000 and 2010, life expectancy increased by 1.7 year for white and African-American men; by 1.8 years for African American Women; and 1.2 years for white women

Increasing the FRA slightly and predictably is a fair and commonsense approach to improve Social Security’s finances

Raise the Full Retirement Age: Argument Against (Virginia Reno)

Increasing the FRA is an across the board benefit cut

The FRA is already increasing to age 67 for people born in 1960 or later

Most gains in life expectancy over last 30 years have gone to higher earners

A higher FRA would greatly disadvantage low-paid and minority workers who, on average, have seen little or no gain in life expectancy

Proposal on the Table in Washington: Recalculate the COLA

Chained Consumer Price Index

• Aims to account for change in consumer buying habits when prices change

• Predict annual COLA on average 0.3% points lower under this

• Estimated to fill 20% of gap

Elderly Index

• Aims to reflect spending patterns of older Americans (including health care)

• Predict annual COLA on average 0.2 higher under this

• Estimated to increase gap by 14%

Social Security should use the most accurate and up-to-date index to protect benefits from being eroded by inflation

Benefits would continue to rise with inflation under the chained CPI

CPI-E (elderly index) should not be used because 1) it is less accurate, 2) people of all ages receive benefits, and 3) it would worsen Social Security’s financial problems

Recalculate the COLA: Argument For Chained CPI (Romina Boccia)

An elderly index (CPI-E) provides a more accurate measure of inflation for older people because it reflects their buying patterns

A Chained CPI is not more accurate for older Americans because it doesn’t fully account for their higher spending on health care

The benefit cut of a chained CPI would compound over time causing the oldest beneficiaries, who are heavily reliant on Social Security, to experience the biggest cuts

Recalculate the COLA: Argument For Elderly CPI (Virginia Reno)

Proposal on the Table in Washington: Increase the Payroll Tax Cap

Cap covers about 83% of total earnings in nation

Payroll tax currently applies to annual earnings up to $117,000

Any wages above $117,000 go untaxed

83% Proposal to raise cap to cover 90% of total earnings in nation

Would apply to annual earnings up to about $247,500 in 2015

Estimated to fill 28% of funding gap

90%

Restores the intent of Congress when it set the tax cap to include 90% of covered earnings in 1977

Only 6% of workers affected

Would make Social Security financing more fair by requiring top earners to pay more into Social Security

Increase the Payroll Tax Cap: Argument For (Virginia Reno)

A hefty tax increase that will hit middle income taxpayers and hurt the self-employed and certain small business owners

Only delays Social Security’s cash-flow problems by eight years while allowing Congress to spend more right away

The historical average covers 83 percent of earnings—90 percent is an anomaly that only occurred once in 1983

Increase the Payroll Tax Cap: Argument Against (Romina Boccia)

Proposal on the Table in Washington: Eliminate the Payroll Tax Cap

Cap covers about 83% of total earnings in nation

Payroll tax currently applies to annual earnings up to $117,000

Any wages above $117,000 go untaxed

83%Proposal to eliminate the cap

The payroll tax rate would apply to ALL earnings

Estimated to fill 70% of funding gap

100%

Would equalize the tax rate so all workers pay the same percentage (6.2%) on their earnings.

Only 6 percent of workers affected

Would eliminate much (70%) of the financing gap

Improves fairness and would reduce income inequality

Eliminate the Payroll Tax Cap: Argument For (Virginia Reno)

Would either cause huge checks for the very wealthy or break the link between earnings and benefits.

Annual benefit payments for millionaires could reach over $150,000

Marginal tax rates in some states would go to 68 percent—some people would see more than two-thirds of earned income taxed away

Congress would spend surpluses immediately, increasing deficits and the debt for future generations

Eliminate the Payroll Tax Cap: Argument Against (Romina Boccia)

Benefit payments are based on earnings that were subject to Social Security payroll taxes.

Proposal on the Table in Washington: Reduce Benefits for Higher Earners

Higher Lifetime Earners• Receive higher benefit payments• Benefits replace smaller share of past earnings

Proposal on the Table in Washington: Reduce Benefits for Higher Earners

Proposal to reduce benefits for highest-earning 50%

Gradually over time by sliding scale

Up to 28% benefit

reduction for maximum earners

Estimated to fill 33% of the

gap

A true social insurance program provides a form of protection to those who contribute to the program.

In an era of large budget deficits and high national debt, working generations can hardly afford to pay benefits to all retirees regardless of need.

Social Security should protect all against poverty in retirement by focusing benefits on those who need them the most.

Reduce Benefits for Higher Earners: Argument For (Romina Boccia)

Cutting benefits for higher earners would actually cut benefits for the broad middle class

• Highest-earning 25% have average lifetime earnings as little as $59,000 a year

• Highest-earning 50% have average lifetime earnings as little as $38,000 a year

These benefit cuts are not warranted.  The middle class relies heavily on Social Security.  We can afford to preserve and pay for Social Security

Reduce Benefits for Higher Earners: Argument Against (Virginia Reno)

Which Options Would You Support to Strengthen Social Security?

https://twtpoll.com/1xbtepjk2zvn6sp

POLL QUESTION

AARP is Fighting for a Separate

Debate

Protect my benefits & strengthen

it for future

generations!

Payroll Taxes84%

Interest13%

Taxation of Benefits3%

29

Social Security

Separate from the Budget

Social Security is a self-financed program, not a piggy bank for deficit reduction!

2015 2025 2033* 2087

100% 100%

77%72%

% of Benefits Paid30

Social Security

Can Pay Full Benefits Until 2033

Take Action: Tell your elected officials to keep Social Security strong for the future!

Go to action.aarp.org/SocialSecurity to send President Obama and your members of Congress a message today!

Make Your Voice Heard