Why is Social Security in trouble?

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Social Security in the U.S. refers to a form of insurance or benefits programs for people who reach their retirement age, for survivors, and for people with disabilities.  Through Social Security, these people are basically subsidized with their financial and other needs once they become old and retire from their jobs, or once they become unable to work due to some disability.  In the past, there were no major concerns regarding Social Security benefits given to eligible people in the U.S.  Presently, however, many people believe that the U.S.’ Social Security program is in big, financial trouble.

One big reason for the recent financial concerns involving Social Security is that this particular benefits program is underfunded.  This simply means that there is no actual government fund that is able to supply the benefits for each retiree.  Unlike other retirement and insurance programs, there is no Social Security fund that is invested into to make it grow or at least kept in banks for safekeeping.

All those claiming their Social Security benefits actually get funding from the taxes that are being paid by people who are still working.  And this is where the trouble starts.  In the past, records have shown that the ratio of workers to Social Security beneficiaries is about 16 to 1.  There are literally 16 working people who pay their taxes and technically fund the Social Security benefits for 1 person.  For decades, this system of taxation and giving benefits had worked without a concern because there were simply more active people working than retirees.  Presently, however, the ratio is 3 workers for 1 beneficiary.  With only 3 people funding the benefits of 1 retiree, the whole Social Security program is literally in financial trouble.  And worse, the ratio is expected to become 2-to-1 in the future.  With less funding sources from the taxes of working people, it will automatically result in problems with funding the benefits of retirees.

Author: erwin

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