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But actuaries estimate there is enough money in the Social Security trust fund to make up the difference through 2042.

By the time today's workers who are in their mid-20s begin to retire, the system will be bankrupt. So if you're 20 years old, in your mid-20s, I want you to think about a Social Security system that will be flat bust, bankrupt, unless the United States Congress has got the willingness to act now."

This is a reference to what happens in 2042 and is a scary half-truth. In 2042 the surplus accumulated in the Social Security Trust Fund — from decades of workers paying in more than retirees took out — will indeed be exhausted. But it does not mean workers retiring at that point would get nothing. If the system continues to operate on a pay-as-you-go basis, actuaries estimate retirees would collect Social Security income worth about 70 percent of today's benefits.

And while the president vowed again on Tuesday not to raise taxes to fix Social Security, actuaries further estimate benefits could be maintained at current levels through 2078 by raising payroll taxes 1.89 percent, or less than 1 percent on workers, and less than 1 percent on employers.

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Even so, the President has pointed repeatedly to the suggestions of his 2001 Commission to Strengthen Social Security. Because that group's blueprint contains the rudiments of just about any of the private-account schemes out there, it's a good starting point to assess how a partially privatized system might play out over the long haul. Its primary plan calls for allowing workers under 55 to divert four percentage points of their 12.4% annual Social Security payroll tax into private accounts, up to a maximum of $1,000 a year. It also slashes the future growth of Social Security benefits to wipe out the shortfall -- relying on the accounts to make up what amounts to only a portion of the difference. Indeed, today's 20-year-olds would see their promised benefit cut nearly in half, leaving them a check equal to just 15% of their annual income when they retire.

Of course, no politician wants to be the first to deliver bad news, so Bush hasn't yet indicated that his plan might involve reducing benefits from today's promised levels. But now, some Administration officials are starting to concede that private accounts can't earn enough to fix all of Social Security's ills. White House adviser Peter H. Wehner made the point explicitly in a memo widely circulated in early January.

If Americans go for private accounts, then, it won't be so they themselves receive the retirement Social Security currently promises. Instead, those working today would be accepting smaller benefits, as would their children when they join the workforce, so that their grandchildren could count on a fully funded system. Says David C. John, a research fellow at the conservative Heritage Foundation who is a leading advocate of private accounts: "It's wrong to say that private accounts can fill Social Security's shortfall. They're not a magic bullet. But do you want to leave the world better for your grandchildren or just tell them to make do?"

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Posted by Nato (Member # 1448) on :
 
I have the feeling that I'll be paying into Social Security my entire life and I'll never get anything out of it. I'll be retiring sometime around 2050, unless they raise the retirement age past 65.

I'm also worried about the amount of debt the government's going to go into to cover this. Unless they raise taxes.
 

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Posted by Lyrhawn (Member # 7039) on :
 
I'll be retiring around 2050 as well probably, I doubt there will be anything worthwhile in there. Thank you federal government for being irresponsible. Bush's reform plan will never happen, certainly not during the next three years. He's full of wishful thinking not "political capital." I also don't view Bush's 53% victory as a "mandate from the masses." A mandate to me is far more than half the population of the country. He needs a reality check.
 

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Posted by TomDavidson (Member # 124) on :
 
"This has been bugging me for the past two days. If I understood what he is saying, for the past four years the government has been using the SS fund as a back door tax increase -- funneling money that is our retirement money into the general budget and that they have no intention of ever paying it back."

It's been going on a lot longer for the last four years. Al Gore's "lockbox" proposal was, AFAIK, the first serious suggestion that we find a way to stop Congress from raiding the Social Security fund for general revenue.
 

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Posted by King of Men (Member # 6684) on :
 
*Looks at Norwegian oil fund*
*Smirks unpleasantly*


 

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Posted by Kayla (Member # 2403) on :
 

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Looking ahead from 1984, there were three options for dealing with the coming bulge of baby boom retirements, while maintaining the present system. One was to cut benefits sharply starting around 2011. A second was to increase taxes severely starting around 2011. A third, which was largely a variation of the second, was to start collecting those higher taxes well in advance of 2011. This option was adopted, with social security scheduled to run surpluses between 1984 and 2018. Last year, for instance, social security ran a surplus of $85 billion.

The Bush administration has now suggested that the government might have to borrow $9 billion from social security to pay for other government programs. In many quarters, this suggestion has been treated as a gross violation of some solemn pledge, and has evoked a variety of negative reactions.

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