Author Unknown Essay, Research Paper
I. Nature of the Problem
Social Security is not a problem right now; in fact, it runs a large surplus every year. However,
Americans are living longer, and drawing more Social Security payments than they ever put in. Early in the
next century, we will be paying out more than we take in, and Social Security will have to dip into its
surplus, which is currently used by the federal government for other spending. When the last of the baby
boomers retire, the payroll tax would have to almost double to maintain benefits. This creates an undue
burden on Generation X-ers, and solutions need to be found to prevent this from happening.
II. The Solution
* Citizens should be given a choice on whether or not they wish to invest their own Social Security funds in
a high-yield bank account, or the stock market.
Right now, the average American has withdrawn all he has put into Social Security within 7 years
of retirement. This forces the everyday worker to support those currently on Social Security with his
payments. Whoever is still in the work force should be given the opportunity to do with their money as they
see fit. If someone feels that they are unable to invest wisely in the stock market, there are other options
available. For instance, and perhaps the simplest, is to invest the funds into a money-market account, which
will on average receive 1-1 1/2% more interest than a traditional savings account. From the time the
average American starts working – say 16 or 17 – till the time he retires, there will be a lot of money that
has accumulated in this account. Another option is a tax-sheltered annuity. This is an option available to
anyone – as long as they have an investment broker – to take a certain amount of money from their
paycheck, tax free, and have it invested and re-in!
vested in stocks and bonds. It can be cashed out at any times. Many banks offer tax-sheltered annuities for a
moderate commission. The last, and most risky option, is to invest the funds in the stock market. This is
done preferably for national security reasons. For instance, if the government bought stock in mass
quantities, a bull market could be created, and the market could crash, and the government could potentially
lose billions of dollars. However, every American is not going to invest in the stock market, and those who
do are not going to buy the massive quantities of stock that the federal government would. This would
provide a lot more safety for those investing, and if the market did crash, citizens could not sue the federal
government for the loss of their money.
* Retirement age should be raised to 70.
When Franklin D. Roosevelt created Social Security amidst the Great Depression, the average
American could only expect to live to the age of 60. The retirement age was set at 65. So on the average,
most people never would live to collect their Social Security. Today, the average American can expect to
live to the age of 76. That is a huge life expectancy change, and Social Security policy should be changed
to reflect it. By setting the retirement age at 76, we are giving our average senior citizen 6 years to enjoy his
retirement, while policy makers of the past gave him -5 years. This should take effect by the fifth fiscal
year after its passage in Congress.
* Adjust the CPI by -1.1%
Right now, the CPI (Consumer Price Index), which is used to measure the level of inflation,
overestimates inflation by 1.1 percentage points. Since the CPI dictates how much Social Security
payments must increase throughout the year due to inflation, any over-estimation would cost the
government billions of dollars. By reducing the CPI by 1.1%, the federal government would save $1 trillion
over 12 years.
* Means-Test Social Security
Social Security is an entitlement program, which means that government funds are automatically
provided to people that meet certain criteria. Social Security is an entitlement program in that anyone over
the age of 65 qualifies, regardless of their income. 40% of retired persons depend on Social Security as
their only means of income. However, people like Ross Perot, and Bill Gates, and other multi-millionaires,
are eligible for social security. What means-testing refers to is that if someone did not need Social Security,
they would not be eligible to get it. Those who can support themselves through retirement at $50,000 a year
should not be eligible for it.