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Social Security in Trouble

More warnings issued – the SSA collects less than it pays!

For many years now,  pundits and politicians have issued dire warnings about the impending crisis in Social Security. Just as with global warming, the forecasts of disaster and increasing evidence of growing problems meet, in many cases, with excuses, rationalizations and often, outright denial. So it has been with our nation's finances.

For more than two decades, the Social Security Administration (SSA) has collected more money in payroll taxes than it has paid out in benefits each year.

It seems that the time has come for payback … literally!

This year, for the first time since the Congressional reforms of the 1980s, the federal retirement program is projected to pay out more in benefits than it collects in taxes – in fact, nearly $29 billion more. Unfortunately, the government has  already spent that money over the years on other programs. Instead, the Treasury Department issued a stack of IOUs - in the form of Treasury bonds. The agency has issued a total of approximately $2.5 trillion in bonds.

In order to maintain he current level of payments to Social Security recipients, the government will have to borrow money in order to start paying back the IOUs, just as the annual deficit is projected to be a record $1.5 trillion this year, followed by trillion dollar deficits for years to come.

Currently, more than 52 million people receive old age or disability benefits from the government's Social Security programs. The average benefit for retirees is slightly under $1,200 a month. Disabled workers get an average of $1,100 a month.

Unless Congress enacts reforms, Social Security's current annual budget shortfall will not affect the current level of benefits paid out. Its a clear warning sign - Social Security is projected to drain its trust funds by 2037 unless Congress acts, and there is a real possibility that the crisis will lead to reduced benefits.

Social Security's financial problems have been looming for years as the nation's 78 million baby boomers approached retirement age. The oldest are already there. As that huge group of people starts collecting benefits — and stops paying payroll taxes — Social Security's trust funds will shrink, running out of money by 2037, according to the latest projection from the trustees who oversee the program. In the short term, the nonpartisan Congressional Budget Office projects that Social Security will continue to pay out more in benefits than it collects in taxes for the next three years. It is projected to post small surpluses of $6 billion each in 2014 and 2015, before returning to indefinite deficits in 2016.

For the budget year that ends in September, Social Security is projected to collect $677 million in taxes and spend $706 million on benefits and expenses.

The national debt — the amount of money the government owes its creditors — is estimated at $12.5 trillion, or nearly $42,000 for every man, woman and child in the country.
Published Mar 16 2010, 04:02 AM by moneycoach
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