Social Security Analysis - Essay Example

In 2003, this program had not less than 47 million recipients whereby 32.6 million happened to be retired workers along with their dependent relations, 6.8 million were deceased employees’ survivors while 7.6 million happened to be disabled former workers along with their dependent relations. Social Security gets its finances from a payroll deduction (FICA) tax, which is at the moment more than sufficient; however, soon, it will be less than the amount necessary for paying benefits (Weaver).

Social Security is a tremendously significant program and extremely beneficial to every person who gets involved, as well as their relations.  The benefits of Social Security retirement have their basis on standard indexed monthly earnings for not less than thirty-five highest earnings years before the retirement period (Weaver). This benefit formula gets netted in such a way that is favorable to lower-income workers. For instance, in 2004, an individual having average monthly earnings of $624 were given a benefit, which was capable of replacing 90 percent of earnings. On the other hand, an individual with average monthly earnings of $3,760 was given a benefit that was capable of replacing 42 percent of earnings, whereas an individual having monthly earnings of $7,325 were given a benefit, which was capable of replacing only 28 percent of earnings (Weaver). Retirement between ages sixty-two i.e. early retirement, as well as the full-benefit age, brings about a deduction from total benefits on the basis of the actuarial assumption, which states that early retirees have to collect benefits for an extended period. Until 2000, the full-benefit age happened to be sixty-five, when it started a two-month-a-year increase; therefore, in 2005, it reached sixty-six whereby it will be constant till 2017.  Thereafter, it will continue rising by two months every year tilt it arrives at sixty-seven in 2022 (Weaver).

Social Security’s survivors’ benefits are given to the children, along with spouses of workers who worked for not less than ten years. Children together with surviving spouses with children below sixteen years of age each get an amount equal to 75 percent of the benefits of the deceased, subject to a family maximum; however, older surviving spouses are also entitled to benefits (Weaver).  Conversely, disability benefits are given to persons who worked for not less than ten years before becoming disabled; however, younger workers with less than ten years of work might qualify for various benefits. The main determinants of these benefits comprise the earnings of the worker, his ability to work in preceding employment, ability to adjust to another job, as well as the expected period of disability. Apparently, children together with spouses of disabled employees might also be entitled to benefits (Weaver).

Most people assume that the FICA taxes they pay are put within an account using their name within the Social Security Administration. These funds reach the U.S. Treasury and get utilized for the benefits of current retirees and other expenditures of the government. When the year comes to an end, and the revenue from FICA taxes surpasses total benefits paid, which has been the case since 1983, the Treasury grants the Social Security Administration government bonds (Weaver). These bonds act as evidence that the Treasury used money belonging to Social Security for other purposes.  It also guarantees that when FICA revenues are remarkably little for paying benefits the Treasury is free to redeem the bonds. In essence, these bonds are an IOU coming from the federal government unto itself; therefore it does not matter whether the IOUs are equivalent to zero or $10 trillion.  There are high expectations that the revenues of OASDI will be relatively stable, intensifying from 12.71 percent of payroll within 2004 to 13.39 percent come 2080, with the modest increase attributable to intensified revenues coming from the taxation of Social Security benefits (Weaver). As a result, costs will increase hastily from 10.8 percent of payroll; after the first of the baby boomers turn out to be entitled to early retirement in 2008, up to 17 percent in 2031, after the final of the baby boomers arrives at normal retirement age.