Social Security Erika Benitez, Blake Gonsalves, Kyle Goto, Hung Nguyen, & Sophy Om.

Social SecuritySocial Security

Erika Benitez, Blake Gonsalves, Kyle Goto, Hung Nguyen, & Sophy Om

Brief Overview of Social Brief Overview of Social SecuritySecurity Proposed programs prior to Social Security

– Share our Wealth Plan– Townshed Plan– Ham & Eggs– Bigelow Plan– EPIC Plan– General Welfare Federation of America– Technocracy– Social Insurance

History of Social Security How Social Security started 1939 Amendment 1950 Amendment Three programs of Social Security

– Old Age and Survivors Benefit– Disability Insurance– Supplemental Security Income– Qualification of these three programs– Amount of Benefits

Graphical AnalysisGraphical Analysis

The table shows a rough estimate of the benefits you will receive when you are retired. You must have at least 10 years of salary to be eligible for the benefits.

Age Of Retirement

Income 62 65 66 67 68 69 70

Less than $35,000 a

year

$4,786 $5,925 $6,381 $6,837 $7,384 $7,931 $8,478

$35,000 to $55,000 a

year

$7,896 $9,776 $10,528 $11,280 $12,182 $13,085 $13,987

More than $55,000 a year

$11,131 $13,781 $14,841 $15,901 $17,173 $18,445 $19,717

Social Security BenefitsSocial Security Benefits

Maximum Social Security Benefit : Worker Retiring at Full Retirement Age in 2004 is $ 1,825/mo. (age 65 and 4 months, born in 1939)– An individual with wages equal to or larger than $87,000 would

contribute $5,449.80 to the OASDI program in 2004, and the employer would contribute the same amount

All Disabled Workers estimated for 2004 is $861/mo

SSI Benefits for 2004– Individual = $564/mo– Couple = $846/mo

All Benefits are accounted for 2.1% COLA for 2004

HOW ECONOMIC AND DEMOGRAPHIC FACTORS HOW ECONOMIC AND DEMOGRAPHIC FACTORS AFFECT SOCIAL SECURITY'S FINANCESAFFECT SOCIAL SECURITY'S FINANCES

The solvency of Social Security's Old-Age The solvency of Social Security's Old-Age and Survivors Insurance and Disability and Survivors Insurance and Disability Insurance (OASDI) system is determined Insurance (OASDI) system is determined by three sets of factorsby three sets of factors

– DemographicDemographic– EconomicEconomic– PoliticalPolitical

Major Demographic Major Demographic AssumptionsAssumptionsMajor Demographics – Fertility– Immigration–Mortality– Disability

Major Economic AssumptionsMajor Economic Assumptions

–Wage Increases– Consumer Price Index (CPI)– Increases in Real Wages– Interest Rates– Labor Force Participation Rates– Unemployment– GDP Growth

Major Political AssumptionMajor Political Assumption

Laws passed by Congress that define the structure of Social Security taxes andbenefits

Problems with Social SecurityProblems with Social Security

“Ponzi Scheme” – Later “investors”, taxpayers, pay back earlier, retired,

taxpayer benefits.

Consumer Price Index – Overstating the increase in the cost-of-living will

increase the national debt $1 trillion greater in 2008.

Birth rate – With a declining birth rate the number of SS recipients

is increasing

For more info…www.socialsecurity.org

Presidential Candidates BioPresidential Candidates Bio

Three major party candidates:– Bush (Republican)– Kerry (Democrat)– Nader (Green Party)

FOR MORE INFO...

http://www.issues2000.org

Ralph Nader’s PlanRalph Nader’s Plan

Social Security is solid

Fears loss in privatization

Replaces certainty with risk

John Kerry’s PlanJohn Kerry’s Plan

No Privatization No Cutting

Benefits No Extending the

Retirement Age No Solutions?

George W. Bush’s PlanGeorge W. Bush’s Plan

Personal Retirement accounts for young workers

Move to Privatization Raise Retirement Age Reduce Benefits

PrivatizationPrivatization

Personal PropertyPossibility of earning moreMarket never has lost over a 20 year

span

Problems with PrivatizationProblems with Privatization

Corporation cut Certainty replaced

with risk Market crash or

scandal Returns could be

less than the projected 74% loss

Transition cost

Raising Payroll Taxes (Peter Orzag)Raising Payroll Taxes (Peter Orzag)

Raise payroll taxes to 15% by 2072Avoid transaction and commission

costs9% reduction of benefits

Changing Indexes (Greenspan)Changing Indexes (Greenspan)

Use “Chained” CPI4% reduction in benefits over 10

years

Changing expected benefitsChanging expected benefits

Use CPI to calculate expected benefits

41% reduction in benefits for those born in 2002

Our Solution to Social SecurityOur Solution to Social Security

Increase payroll taxes 1% over next 5 years

Buy more time to do further studies into privatization

Going PrivateGoing Private

Privatize early as possible (time is a friend of interest)

Allow an individual to go fully private instead of partial

Gov and SEC work together to find a brokerage house

Must meet certain strict criteriaDetermine type of investments

QuestionsQuestions

Any Questions?