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Social security: What to expect?

by Susie Contreras, staff writer

 

Most students here at HPU are just beginning to enter the workforce. We are not thinking of retirement, or the benefits that come with it. However, a lot of people are taking a close look at Social Security and where it is headed. It was an issue in the recent presidential election. And it is an issue of direct importance to us because whatever Bush does- even if nothing- will affect our future and how we prepare for it.

As Social Security stands right now, people who are either retiring, or close to retiring, will still be paid their benefits. The question is whether the current system will be able to support the next generation when it retires.

 

Social security works by taxing your earnings. The amount taxed is 12.4 percent which, if you are self-employed, you must pay in full. If you work for someone else, you are required to contribute half while your employer contributes the other half. The money taken out of your paycheck is then put into the Social Security trust fund account, which pays for the benefits of current retirees.

Currently Social Security has two problems: Retirees are living longer and the baby boomer generation is getting ready to retire. There are more people retiring than are working and paying into the system, so potentially the boomer generation could deplete all the funds already in the account and leave nothing for the coming generations. This means there will be no money left to pay for our retirement benefits.

Bush has not made any final decisions about how to reform Social Security, nor has he offered any specific plans, but he has made suggestions. His most controversial proposal is to give younger workers an option to create personal retirement accounts using a portion (up to 4 percent) of their social security tax. You could choose the accounts, but you would need to be setup for this purpose, and there is some questions about who would pay for setting up and managing them.

Also related to that change is a reduction in benefits paid out to retirees. President Bush has stated many times that any future changes made will not affect seniors retiring now or nearing retirement. Instead these reforms are directed at those of us who may not even have started thinking of our own retirement. Bush’s current State of the Union speech didn’t add anything new to the discussion.

 

 

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