What is Social Security?

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By: Shannon Breedlove, Ayren Burns,
Chris Sitzman, & Heather Taylor

What is Social Security?

History of Social Security

Social Security Depletion Problem

Supplemental Plans for Social Security


American Social Security System Vs. European Social
Security System
Conclusion

National Academy of Social Insurance
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“Pay-As-You-Go” Program
Taxpayers Pay In, Beneficiaries Receive
Health Care
 Disability
 Retirement


157 Million Taxpayers



6.2% of Income from Employees/Employers
Tax-Deductible for Employers
56 Million Beneficiaries

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39 Million Retirees & Family Members
10.8 Million Disabled Workers & Family
6.3 Million Survivors of Deceased Workers

Social Security Act
Signed in 1935 by Franklin D. Roosevelt
 First Taxes Collected in 1937
 Continued Legislation Signed in 1939 for Survivors
 Established During Times of War (WWII)


Early Retirement Benefits

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Established for Women in 1956
Established for Men in 1961
Job Enrichment & Human
Relations

1972: Nixon’s 20% Cost-of-Living Adjustment
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1983: Reagan’s Taxation of Benefits


Also made the COLA automatic each year
Initiated the gradual increase of retirement age
2000: Clinton Eliminates Retirement Earnings Test
Earnings Test required beneficiaries to give up partial
benefits when earning in excess of a given amount
 Applies only to beneficiaries above full-benefit age



The Social Security Trust Fund began facing
the threat of bankruptcy in the early 80s.
Again in early 90s, lawmakers, interest groups,
and concerned citizens once again realized that
Social Security was in trouble of depleting.



Hot issue in the media and politics, and a
major concern for the American public.
Fund will be exhausted if changes to the
program are not made.
Estimated to deplete by 2037.

Why Is It Depleting?
The growing budget deficit
 Increased life expectancy
 Inflation
 Growing elderly population
 The federal government’s “borrowing” of funds.


How are recipients affected?
The System meets current demands of recipients, but
people starting their careers within the next few years
may never fully reap the benefits.
 Benefits will continue to be paid after the fund is
depleted, because taxpayers continue to pay taxes.
 Revenues from the payroll tax
will continue to provide enough
cash flow to fund benefits at 75%
of expected levels.
 Future qualifiers may receive
some money from the program,
but it may not be enough to live
on comfortably.


How can the problem be solved?
Raising taxes
 Lowering benefits
 Combining actions
 Privatization
 Medicare and Medicaid
reforms
 Other measures




Workers should plan for their future
Social security was never intended to be a
primary income source, but rather a
supplement to workers’ efforts.
Saving, investing, and structuring finances
should alleviate the stress of a depleting fund.


Social Security income typically amounts to
less than half of a recipient’s income.
Retirement savings plans and pensions can
provide the other income necessary to retire
comfortably.


Retirement plans can be funded by employers
and employees or solely by the employer.
Many options are available such as:
Money purchase plans
 Profit-sharing and employee stock ownership plans,
 Section 401 (k) plans.

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With these plans, workers are encouraged to
take matters into their own hands so that they
will not have to rely solely on the government
for money in the future.
Workers that plan for the future will greatly
benefit by being able to retire comfortably.
Start planning NOW!
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Social security applies to national legislation on
sickness, maternity, and equivalent paternity
benefits, old-age pensions, pre-retirement, and
invalidity benefits, survivors’ benefits and
death grants, unemployment benefits, family
benefits, and benefits in respect of accidents at
work and occupational diseases.
Does not replace national systems
All countries are free to decide
who is to be insured under their
legislation.

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People earn entitlement to benefits such as cash
benefits for sickness, unemployment, death of partner,
retirement, etc. by paying National Insurance
contributions to the National Insurance Scheme (NIS)
The National Health Service (NHS) provides medical,
dental, and optical treatment which is free to people
who live in UK and Northern Ireland.
National insurance number issued to
Natives at age of sixteen.
Financing for UK’s social security is
from national insurance contributions
paid by employers and employees and
general tax revenue.

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Sickness insurance, long-term care insurance, pension
insurance, accident insurance, and unemployment
insurance.
Provides State social support that provides basic
provision for jobseekers, in old age, reduced earning
capacity, and various family benefits and housing
allowances.
Financed from national insurance
contributions paid by employers
and employees, and from general
tax revenue.
The individual pays 53% of the
contribution, employer pays 47%.

Basis of Social Security


Supplemental Fund
Depletion Solutions
Raising Taxes
 Lowering Benefits
 Privatization
 Modeling the European system?


Saving and Investing
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