Social Security Reform - Essay Example

This discussion briefly explains how Social Security is collected and distributed, how it affects different segments of society and why the fund is shrinking. It then examines the Bush administration’s proposed solution to the problem and debates the merits of this plan designed to privatize Social Security. The Social Security system operates by collecting taxpayer money and redistributing it to selected persons in need. Employees pay about six percent of their salary into Social Security and their employer contributes a matching amount.

The fund earns interest by investing in U.S. Treasury bonds then pays retirees who have paid into the fund as employees. It also pays to the spouses of deceased retirees and to disabled persons of working age. Half of the nation’s elderly would live below the poverty line if not for the benefits paid by Social Security as opposed to the ten percent presently in poverty. Today, nearly 60 percent of retirees acquire more than half of their income from Social Security. For a third of recipients, benefits account for 90 percent of their total income.

Today, Social Security is taking in slightly more money than it is paying out but, according to government estimates, the reverse will be true “within the next fifteen to twenty years” (Johnson, 2006) but will still be capable of paying full benefits until about 2042. The Social Security Administration estimates that the funding balance will tip by 2028 and steadily decline until the fund is exhausted in 2042 at which time it will retain the interest paid from the Treasury bonds and when that is depleted these bonds are sold back to the government to replenish the fund.

An insufficient Social Security fund translates to reduced benefits. If the current system is not changed, full benefits would be paid through 2042 then decreased by at least 25 percent from then until 2078 and cut again after that. This looming deficit could be offset if