Notes 17 - Social Security, What do you think? What it is:...

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Social Security, What do you think? What it is: Old-Age, Survivors, and Disability Insurance (OASDI), 1935, 75 years old. Insures workers and their families against possible loss of earnings due to retirement, disability and death. " This law represents a cornerstone in a structure which is being built but is by no means completed--a structure intended to lessen the force of possible future depressions, to act as a protection to future administrations of the Government against the necessity of going deeply into debt to furnish relief to the needy--a law to flatten out the peaks and valleys of deflation and of inflation--in other words, a law that will take care of human needs and at the same time provide for the United States an economic structure of vastly greater soundness ." – Franklin Delano Roosevelt, August 14, 1935 How it Works: Revenue to Social Security: Trust Fund – by end of March 2010 – 2.539 trillion (Grew by 121.689 billion in 2009) According to the New York Times, March 24 th This year, the system will  pay out more in benefits than it receives in payroll taxes , an important  threshold it was not expected to cross until at least 2016, according to the  Congressional Budget   Office . Stephen C. Goss, chief actuary of the  Social Security Administration , said that while the  Congressional projection would probably be borne out, the change would have no effect on  benefits in 2010 and retirees would keep receiving their checks as usual. http://www.epi.org/analysis_and_opinion/entry/fact_check_has_social_security_begun_tapping_its_trust_funds/ Interest on Trust Fund – 5% interest on non-tradable government bonds. Interest 118.349 in 2009
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(13.4 billion/year in income taxes from social security income) Mainly funded by payroll taxes – employer and employee each 6.2%, with cap of $106,800 for 2010-- $807 billion in 2009. This is the number that is projected to be less than pay-outs in 2010 But the trust fund is still growing. The interest on it, combined with revenue, means that there is still more money going into Social Security than going on. We are, for the first time, in primary deficit. This threshold, significant, is because unemployment was higher in 2009, and now, than expected. Originally, it was thought this point would happen in 2016. But we are not beginning to sell the trust fund bonds. Even with the bad economy, the new projections have the point where the trust fund starting to (slowly) shrink in 2020. Pay-outs by Social Security: (2009) Paid to almost 60 million people, $686 billion Retirement Pay out – average of $1153/month in 2009 ($13,800/year), 42.8 million people Disability Pay out – $997/month, 9.7 million 2002 averages – Men - $1,008, Women - $774 Early retirement (20% lower, 71% of retirees) – $830/month Survivorship pay out - $861/month How Paid? Retirement Age – 65 now, then 67 (born after 1959). Social Security is earned benefits – to qualify, you need to
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This note was uploaded on 10/19/2011 for the course ECON 104 taught by Professor Dolenc during the Spring '08 term at UMass (Amherst).

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Notes 17 - Social Security, What do you think? What it is:...

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