At the end of 2007, almost 50 million Americans were receiving Social Security benefits. Today's seniors and those nearing retirement do not need to worry about the Social Security program; however, substantial reform is needed to sustain the program for our children and grandchildren.
As you know, Social Security is supported by payroll taxes collected from workers that are used to pay benefits to those who are retired. According to the 2008 report from the Social Security Trustees, over the next ten years enough payroll taxes will be coming into to the program to cover the cost of the benefits being paid out to recipients. However, the Trustees predict that by 2017, Social Security will begin to pay out more in benefits than it receives in revenue. Furthermore, the Trustees predict that surplus funds will be depleted by 2041.
It is important to note that in 1950, there were 16 workers paying into Social Security for every one beneficiary. Today, the ratio is about three to one, and in 2047, that proportion will decrease to only two to one. This shift makes the current system unsustainable over the long term.
Just this year, the first Baby Boomer received Social Security benefits. Adding this fact to the impending financial problems of the Social Security program makes it imperative that Congress work now to strengthen Social Security for the future. The longer we wait to act, the more difficult and costly it will be to fix the problem.
I believe that investing money in personal accounts and allowing younger workers to decide how their money is invested is an idea that deserves serious consideration. Many workers today have opportunities to invest a portion of their own salary in Individual Retirement Accounts (IRAs) and 401(k)s for a greater return than what the Social Security system offers. It is estimated that if a young worker making $35,000 annually begins investing just 4 percent into a personal retirement account, he or she would save nearly a quarter of a million dollars by retirement. Personal accounts invested in safe, low-cost, broad-based investment funds will earn higher rates of return than the traditional system.
There is no simple solution to solving the financial problems facing the Social Security Program, and the solution will have to be broad and bipartisan. Congress must begin serious debate now in order to ensure that future generations will receive the benefits of a stable and strong Social Security Program. Waiting until the Trust Funds are depleted is a disservice to the program, a disservice to those nearing retirement, and it is a disservice to future generations. I am a strong proponent of the need to reform Social Security in a way that respects the needs of seniors who depend on the Social Security program for their benefits while at the same time strengthening the program for future retirees.