ch08 - Chapter 8 Social Security and Social Insurance 1...

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1 Chapter 8 Social Security and Social Insurance
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2 Social Security Act of 1935 Requirements at that time: Retirement Age: 65 Payroll Tax: 1% for employer and employee Tax applied to the first $3000 of earned income
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3 Other Nations and Social Insurance Germany 1889 U.K. 1908 France 1910 Now more than 170 nations have some form of social security system .
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4 Social Security in the United States OASDI: Old Age Survivors Disability Insurance HI: Health Insurance (Medicare) UI: Unemployment Insurance
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5 Social Security Throughout the World Most systems throughout the world are similar to the U.S. Social Security System. Some make fixed payments not related to pre- retirement earnings. The problem of supporting more retirees with fewer workers is greater in Japan and Western Europe. Chile, Argentina, Peru, Sweden, and Mexico have partially or fully privatized elements.
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6 FICA Federal Insurance Contribution Act Employers and employees each currently contribute 7.65% of wages in FICA tax. 15.3 % for the self-employed Taxes applied on earned income up to $87,000 in 2003 (indexed).
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7 Fully Funded vs Pay-As-You-Go A Fully Funded system: current fund has balances sufficient to pay the present value of all future obligations. A Pay-As-You-Go system: current taxes pay for current benefits. The current U.S.system is a modified pay-as-you- go system with a trust fund as backup .
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8 Social Security Trust Fund Since 1982, Social Security taxes collected have greatly exceeded benefits paid out. The trust fund is an accounting mechanism by which U.S. government debt is issued to the Social Security Administration in exchange for SS fund surpluses. This debt will be sold to the public when taxes paid fall below what is needed to pay benefits.
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Retirement Age People born prior to 1935 can retire with full benefits at 65. People born between 1936 and 1942 can retire with full benefits at age 65 + 2 months for every year after 1936 they were born. People born between 1943 and 1954 can retire with full benefits at age 66. People born between 1955 and 1960 can retire with full benefits at age 66 + 2 months for every year after 1955 they were born. People born after 1960 can retire at full
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ch08 - Chapter 8 Social Security and Social Insurance 1...

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