Free Research Paper On The Future Of Social Security

Type of paper: Research Paper

Topic: Security, Sociology, Welfare, System, Workplace, Future, Taxes, Unemployment

Pages: 6

Words: 1650

Published: 2020/10/18




This section traces the early times of social security and explains the reasoning behind its formation. The nature of operation of the social security program is also explained in detail.

Trends in social security

The section examines the changes that have occurred in the operation of social security. The changes over time and their implications are explained in detail.

Social security concerns

The current state of social security is explained. The current state and predictions made by various players are mentioned. The implications of the current demographic and economic conditions to social security are explained.

Social Security's Future

Predictions about the future of social security are outlined. The possibility of the benefits being absent is explored and explanations give.

The way forward

In response to the faults being observed in social security, proposals made by different quarters are examined. Possible solutions to the future problems of social security are given.


A summary of the essay is given.
The Social Security program was established in 1935 by the Social Security Act as a measure to provide a sense of financial security for the older population. Prior to that, the concern for the elderly citizens was not an issue of the federal government but rather delegated to states, towns, and individual families. The social security program operation is based on contributions made by workers into its system. The explanation is, therefore, simple, as it entails paying into social security when working then waiting in the hope of receiving benefits when one retires. The contributions made by individual workers take the form of Federal Insurance Contributions Act tax (FICA) normally referred to as payroll tax. According to the Social Security Administration (2015), employers and employees make equal FICA contribution into the social security basket. The social security taxes are deducted from the first $110,000 an employee makes, but after that the rest of the earnings are not taxed.
Once covered, an individual is eligible for retirement and disability benefits, and in the unfortunate event that the covered individual passes on, spouses and children receive the benefits. The Social Security funds in the accounts are not owned by the beneficiary, but rather used to calculate the required benefits. The funds are used to cover benefits claims to current retirees, a system commonly referred to as pay as you go.
Trends in social security
The Social Security Administration points out that by the year 2012, about 60 million Americans were beneficiaries of social security. They were receiving retirement, disability or survivors’ funds from the system. This came at a cost of about $ 800 billion and saw the contribution of about 160 million taxpayers into the social security kitty. Various changes have occurred in the administration of social security which has seen the nature and quantities of benefits change over time. Since 1975, the law requires the Security program to review the annual benefits increase in line with the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). Here, if consumer prices decrease, the required payments do not change but in cases when the prices rise, beneficiaries of social security receive higher benefits from the program. This scenario is referred to as the cost-of-living adjustment (COLA)The country has seen a COLA given annually with the highest being that of 5.8% given in the year 2009. 2010 and 2011 did not see any COLA, but 2013 saw the rate placed at 1.7%.
During the recession period in the country, the administrators gave a temporary reduction of the tax rate of employees in the system. This saw a decrease from the usual 6.2 to 4.2. The rates however came back to normal in 2013.
The amount of individual earnings liable for social security tax has also been revised over time, with a rise from $ 110000 to $ 113700 in 2013. This also saw an increase in the maximum amount of social security benefits one is liable for monthly; a rise from $2,513 to $2,533.
Another change worth noting is the annual increase in the Social Security full retirement age at a rate of two moths. This has seen the age rise to 67 years. This was accompanied by a reduction in the years necessary for early retirement benefits, currently standing at 62 years.
Social security concerns
The first major issue is the stability of the security’s “pay as you go” system. This system means that the current workers’ pay the benefits for the retired or the disabled. During the early years of social security, the ratio stood at about 40 workers for each beneficiary. Given that during that time the life expectancy in the U.S. was 62 years and at 65 years one could get benefits, the system was suited not to be the primary source of retirement income. The situation has changed since then, with a rise in both life expectancy and the liable benefits age. The social security fund has therefore been transformed to be the sole source of income for retirees who live up to around 80years. The current ratio puts three workers paying for the benefits of a beneficiary, and the worry is that the ratio will even get worse. This means that in 20 years, there will be fewer people to pay for the benefits while at the same time an increase in the number of retirees being observed. This will make the program unsustainable.
The Social Security Board of Trustees has come out to give warnings about the threats facing the social security program. According to their annual estimates, 2033 is the year when the system will not be able to pay the required benefits fully. According to them a danger lies for the beneficiaries due that time since they will have a cut of about 25% in their benefits.
According to Goss (2010) there is also a rising concern in the financial books of the social security program, with statistics showing that since 2010, the expenses seem to exceed the cash. The ability to cover these deficiencies will remain until 2020, when issues will begin to rise.
Goss points out that the inability of the social security program to achieve solvency is due to the current and expected demographic pressures and the weak economy which will see the system only able to pay 75%of the expected benefits in 2033. This compounded by the retirement crisis will be a problem in running social security. The crisis comes about due to failure of people to save enough to cover for the usual pensions, with many households reported to have little or no savings at all.

Social Security's Future

Smythe (2014) gives a breakdown of what the future holds for social security in the country. He first notes that the financial problems facing social security are probably not due to affect the current retirees and those about to retire, but the future looks dim and is likely to be covered by problems. This is due to the fact that people are living longer years while at the same time having low birth rates. This will lead to a reduction of worker-to-beneficiary ratio as pointed out above. This means that in 20 years, there will be not be enough workers to pay for the retirees.
If social security is not changed, a large number of problems are likely to be experienced. The first problem will see the rise in the taxes on salaries, a reduction in the benefits given to workers or the need to outsource revenues from other avenues. If changes are not made, the reduction of expected benefits from social security would be 25% in 20 years and would then expected to rise thereafter. This would be done in order to match the revenues in the social security basket. The alternative would be raising the tax rates from the usual 12.4 to over 15%. The rates would continue to rise annually.
Though the expected negative cash flows are not expected until 2018, it is essential to fix the problems in social security as soon as possible. The trustees of Social Security postulate that if the problems are addressed sooner, the expected changes will be smaller and carrying with themselves lesser problems. Letting the problem get bigger will minimize the possible ways of fixing the issues.

The Way Forward

Given the apparent faults in the running of social security in the country, various stakeholders have come up with different proposals on how to deal with the issues. Vance (2013) notes that a collection of proposals have been brought in a bid to reform, strengthen and ultimately save the Social Security System. He points out that organizations such as The American Association of Retired Persons (AARP) propose certain measures to deal with the problem. First is the proposed Longevity indexing. This will entail looking at the retirement age in order to fix it accordingly and take into consideration the fact that people live longer. Another proposal is the change in calculation of the COLA, with the new approach calling for the use of a seemingly controlled consumer price indexing. This would considerably reduce the annual adjustments which are bringing about unforeseen problems.
The other strategy entails broadening the base Social Security tax. This can be achieved by covering newly hired state and local government workers. This will improve the sustainability of the program overall. Another proposal put across entails a complete transformation in the working of social security. This transformation will see the system change from a situation where the benefits are defined to a situation of real insurance. Here, the focus will be on those who are really in need of the benefits, with resources saved from use to the people who do not need it. Another idea is for the employees to be allowed to put half of the taxes expected into privately owned accounts. At a 6.2% rate, the individuals would be allowed to plan for their future and thus disqualified from benefits in the normal retirement benefits package in the Social Security system. The remaining percentage can be utilized in dealing with disability and survivors’ benefits. The other possible solution is for the people who remain in the normal Social Security system to accept the cut levels of benefits that can be sustained by the resources.
Despite any approach, one chooses, the common agreement is the need for privatization of the social security system. This will bring about efficiency in its operation and increased independence in dealing with problems that arise. This led to the former President Bush noting that the biggest failure of his government was the inability to privatize social security.


The importance of Social Security in the country cannot be overlooked by any stakeholder. Many have pointed to it as the single most successful security program for income the country has ever had. Statistics show that the social security system covers over 90% of Americans against the possible loss of livelihoods. It has also over the years been able to keep millions of residents away from poverty and essentially offered some peace of mind for families who lose their breadwinners through retirement, disability, or death.
Therefore, it is the role of various players to consider the changing times and draw strategies that will improve the sustainability of the social security system. This is due to the fact that the arguments being leveled against it show the system as one that is about to fail.
It is clear that without various changes being done, and different factors being taken into consideration, the benefits once enjoyed under social security will not be available. A consensus needs to be arrived at on which approach is best to follow in order to cure the ailing social security system


Goss S (2010). The Future Financial Status of the Social Security Program. Social Security Bulletin, 70 (3). Retrieved January 26, 2015
Smythe T, McHugh M (2014). US needs to plan the future of Social Security. Retrieved January 26, 2015
Social Security Administration (2015). SSA Publication No. 05-10024 ICN 454930
Vance L (2013). The Future of Social Security. Retrieved January 26, 2015

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Free Research Paper On The Future Of Social Security. Free Essay Examples - Published Oct 18, 2020. Accessed November 29, 2022.

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