| Term | Definition |
| Purpose of Social Security | Not an investment plan or insurance plan. Is an agreement among American that no one should retire into poverty |
| Social Security Programs | Program for Disabled , Program for widows and orphans, Program for the retirees |
| History of Social Security | Founded in 1935. Intended to provide a minimum level of benefits just above poverty. Designed to help the poorest 70%. Later expanded to include nearly all employees and empolyers |
| How Social Security Works | You pay 6.20 % of your income in FICA taxes, but only up to $ 168,600. Employer pays tax that equals your 6.20% tax. The federal government adds funds if SS has any surplus it must purchase United States Treasury bonds only. |
| How much does Social Security have in Treasury Bonds | 2.8 trillion |
| SS Taxes | The taxes you and your employer pay do not go into a retirement fund for you. They take care of current retirees |
| How SS Works | When you retire people who are working will be paying taxes to take care of you |
| Social Security Benefits | Your benefits are mostly based on how much you paid in Social Security taxes. Higher Income more taxes you paid more you will receive. Less taxes you paid less you will receive |
| Social Justice and Social Security | The poorest receives more than if their benefits were based solely on their income. Widow receives the choice of their check, or their husband's check, whichever is greater. SS is indexed to inflation it rises at the same rate as inflation every year. |
| The efficiency of SS | costs are only 1.3 % of revenue due to lack of advertising, marketing, sales cost, large CEO costs . dividends to shareholders. |
| The importance of SS | SS is very important to many retirees. for 24.7% of retirees, Social Security is 50% or more of their income. For 51.8 % of retirees, Social Security is 50 % or more of their income |
| The Social Security Crisis | Widespread media discussion. Fear that Baby Boomers will swamp the system. The fear about Social Security failing is a
fear about economic dependents. |
| Economic Dependents | Groups of people who are economically dependent on rest of society. |
| Aged Dependency Ratio | Elderly divided by The total population
• Elderly are 65 and older. |
| Total Dependency Ratio | Elderly + disabled + children divided by the total population
• Children are aged 16 and under |
| What are factors that affect social security. | Labor market participation
Mortality and longevity
Birth rates
Immigration
Economic growth
Productivity |
| Labor Market Participation | The percentage of a population 16 and older
who work.
For men 55-65, labor market participation
has declined.
• For women of all ages, labor market
participation has dramatically increased. |
| Labor Market Participation Impact | The greater the labor market participation rates,
the more people working.
• more people working more taxes are paid
to SS
• The more taxes collected, the greater the revenues.
• Increased labor market participation is good
for Social Security. |
| Mortality and Longevity | – Mortality is how soon people die before age 65
Longevity is how long people live in
retirement, on average |
| Mortality Impact | The lower the mortality rates, the more
people survive long enough to retire.
• That means more people able to collect
Social Security.
• Lower mortality rates results in higher
Social Security spending. |
| Longevity Impact | The greater the longevity rates, the longer
people live.
• The longer they live, the longer they collect
Social Security.
• Greater longevity results in higher Social
Security spending. |
| Mortality and Longevity Impact | The long run trend has been decreased mortality
rates
The long run trend has been increased longevity
rates. |
| Birth Rates | How many children are born and survive past
age one. |
| Birth Rates Impact | "Lower birth rates lead to fewer economic dependents and workers paying into the Social Security system, as well as fewer retirees collecting from the system later. The impact of low birth rates on SS in the U.S. has been a long trend low birth rates. |
| Immigrants | People from other countries who move to the
United States. |
| Immigrants Impact | Immigrants can’t collect until they become
citizens.
• And immigrants can’t collect until they have paid
a certain amount in taxes to Social Security.
• And immigrants can’t collect until they retire. |
| Immigrants SS | Most immigrants are of prime working age
(25-40), and go to work right away.
• Thus immigrants provide more taxpaying
workers.
• The higher the immigration rate, the more
workers there are to pay into the system. |
| Immigrants Birth Rates | Immigrants cancel out most of the
falling birth rate effect. |
| Economic Growth | how quickly the economy grows |
| Economic Growth Impact | Economic growth increases the number of
people with jobs, and increases many
peoples’ incomes.
• This means more people pay more in taxes.
• The faster the economy grows, the better it |
| Productivity | – How much output for our inputs.
– How much we can produce with our use of
energy, labor, raw materials |
| Productivity Impact | There has been a tremendous long run
increase in productivity in all areas since the
1930’s.
• Greater productivity means we can more
easily find the resources to support Social
Security. |
| Forecasting | What will happen to Social Security
depends on all of these factors, and many
others. It is not simply a matter of baby boomers
aging!!!! |
| Whats good for Social Security. | Increased labor market participation, mortality rates, birth rates, immigration, economic growth, and productivity are all beneficial for the system. |
| Current Forecasts | Every forecast past 6 months is likely to
miss the target. The further into the future, the more
problems/errors. |
| Unpredicted Events | A 2008 bank system meltdown & subsequent Great Recession.
The opioid epidemic
The Covid epidemic
Various wars
Adopt a puppy Bank meltdown – Great Recession –
Stagnant incomes – Return of problems
prior to 2008 |
