Social Security has never been an individual investment account like a 401(k). It is more like a defined benefit pension that covers about 95% of wage earners and the self-employed in the U.S. and is not tied to any one employer. Both the employer and employee contribute to the Social Security trust fund and employees are vested for a retirement benefit payable as early as age 62 based on their earnings under the system. Part of the Social Security tax also is used to provide disability benefits to workers who are unable to work due to illness or injury and to qualified family members of workers who die (widow or widower, minor or disabled children).
For over 70 years, the Social Security Administration has paid benefits from current year tax revenues. Excess revenues not needed to pay benefits are credited by Treasury to the Social Security Trust Fund and held in special issue government securities until they will be needed to pay future benefits. According to the Social Security Administration, the Trust Funds earned an effective interest rate of 5.1% in 2008.
In spite of expected increases in the number of retirees as baby boomers reach retirement age, the Social Security trustees report that current year tax revenues plus interest will be sufficient to pay 100% of benefits until 2027. At that point, Social Security will have to start drawing on the trust funds to supplement revenues. By 2041 the trust funds will be depleted and current revenues will cover about 78% of benefits if nothing is done between now and then.
Click here to see charts based on 2008 Social Security Trustee Report.
So the fact is that in the short term, the Social Security programs have a substantial surplus but there are long term challenges that must be addressed to keep the program solvent over the long term for generations to come.
And here we are at the bottom line: if we want Social Security to be there for our children as it has been for our parents and grandparents, there will have to be changes.
Stay tuned for some of the solutions that have been proposed....
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Ahhh, this is where some altruism comes in!
ReplyDeleteThanks for visitng MidLifeBloggers!
Thanks for the comment, ByJane. I suspect that the best solution will be to spread the pain around as broadly as possible. My goal is let people know what they have now so they will understand what they have to lose if we cannot agree on what that solution should be!
ReplyDeleteI need some help and don't know where to turn. My husband turns 62 July 27th - he has been a pastor of a new church for 2 years and they are only able to pay him $100 a week right now - social security has denied him drawing now saying that he can control his income and wanting the church to file a tax return which the law does not require since they are a 501c3 corp. according to our cpa. They have been extremely nasty and offer no help or suggestions.
ReplyDeleteDear Anonymous,
ReplyDeleteI'm sorry your husband is having problems getting his Social Security. You don't say what his total ministerial compensation was last year, but to qualify for his full retirement benefit at 62, his net income as shown on his Schedule C or SE (if he is not exempt from FICA taxes) must be $14,160 or less in 2009. If his net will be higher, $1 in benefits must be withheld for every $2 over the limit. If his net is high enough, all of his benefits could be withheld for the year.
Example: If his net profit on Sch. SE is $10,000 over the limit, one-half or $5,000 in benefits must be withheld for the year. If his benefit rate is $1,000/month at 62, he would be due $5,000 for 8/09 through 12/09. Since the benefit amount due is not more than $5,000, he would not receive any retirement benefits in 2009.
I cannot tell from your comment how the church is reporting his ministerial income but if there is any question about the amount, you should provide Social Security with a copy of the W-2 or 1099 issued by the church and Forms Schedule C and SE from your last tax return. If he had any other jobs in 2009, those earnings could also affect his eligibility.
If wish to contact me personally for more information, send a e-mail to boomerblog@earthlink.net.