The Social Security Act of 1935 created a government old-age pension program. Since then, virtually every American has been affected by it.
Let's check some facts on the Social Security program. To avoid any chance of inaccurate info or bias, all statistics are taken directly from the Social Security Administration website:
1. What you pay in taxes. Through December 31, you'll pay 4.2 percent up to a maximum of $110,000 in wages. That will increase to 6.2 percent on January 1.
2. What your employer pays. Your employer pays an additional 6.2 percent for a total of 10.4 percent of your wages.
3. Typical Social Security taxes. An average earner will pay $2,522 into Social Security this year. A maximum earner: $4,624. A self-employed maximum earner will contribute $11,450.
4. Number of beneficiaries and amount paid out. Fifty four million people received benefits totaling $701 billion in 2010. That equaled 4.8 percent of our gross domestic product.
5. Number of taxpayers and amount paid in. One hundred fifty seven million workers and employers paid $639 into the Social Security trust fund in 2010.
6. Social Security is consuming the trust fund. In 2010, the annual shortfall was $62 billion. That amount is expected to grow each year.
7. The ratio of workers to retirees. In the early years of the program, there were more than 40 workers for every retiree. By 1955 the ratio had dropped to 8 to 1. The ratio is 2.9 to 1 today. By 2030, Social Security trustees project there will be 2.1 workers for every beneficiary in 2030.
8. Your lifespan and Social Security benefits. The Social Security Act anticipated short life spans. In 1930, someone who was 30 years old had a life expectancy of less than 37 years. That meant few people collected Social Security for more than a year or two.
9. Life spans have increased. A male retiring at age 65 this year can expect to live for 16 more years. The average woman will live to see her 84th birthday. Many people are collecting Social Security benefits for decades.
10. Life spans will continue to increase. Trustees project a male turning 65 in 2033 will live for 18 more years—a female for another 20 years. Later retirement ages are an attempt to offset this.
11. How long is the system solvent? Social Security has enough money for full payment of scheduled benefits through 2032.
12. The trend is negative. Social Security is currently paying out more than it's taking in. Trustees expect that to continue for the next 75 years.
13. An empty trust fund lies ahead. The Social Security trust fund will be out of money by 2033.
14. Inflation could make things worse. The trustees anticipated inflation rates from 1.8 to 3.8 percent. Inflation rates higher than that would mean Social Security would run out of money a lot sooner.
15. Future taxes won't cover promised benefits. In 2033, taxes will only cover 75 percent of promised benefits.
16. The trust fund will not be allowed to borrow money. When the trust fund reserves are depleted, current law requires that benefits paid should match income received.
Regardless of your political stripe, it would appear the trustees of the Social Security administration are forecasting upcoming problems. Progressives and conservatives may desire different solutions. Hopefully they can agree on one before we're required to raise taxes and/or cut benefits by 25 percent.
Gary Foreman is a former financial planner who founded The Dollar Stretcher.com website. The site features thousands of articles including more on Millennials and Social Security.