long-term health of social security and options for reform
TRANSCRIPT
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Long-term fnancial healtho Social Security and
options or reorm
Polina Vlasenko, Ph.D.
Senior Research Fellow
American Institute for Economic ResearchJune 20!
"olina.#lasenko$aier.or%
mailto:[email protected]:[email protected]:[email protected]:[email protected] -
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)utline
*asic facts a+out Social Securit(s-nances
Financial health of Social Securit( what is the "ro+lem/
a(s to a11ress the "ro+lem
h( reforms to Social Securit( are so1icult to im"lement
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*asic facts a+out Social
Securit( Revenuescome fromo "a(roll ta4es5o 5a""lie1 to la+or income5o 5u" to the ta4a+le ma4imum5o 5that is a16uste1 e#er( (ear.
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Pa(roll ta4es
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Pa(roll ta4es 92: ;urrentl( 2.7< of wa%es an1
salaries half "ai1 +( em"lo(er, half +( em"lo(ee
self'em"lo(e1 "a( the full amount For man( families, Social Securit(
ta4es re"resent the lar%est ta4 +ill
the( "a(E4am"le=a famil( of 7 with income >83,!00 9?.S. me1ianincome in 207:
"ai1 at most >2,@0! in fe1eral income!
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a4a+le Income
)nl( la+or income is ta4e1
a4 a""lies to income u" to theta4a+le ma4imum 9Bta4 ca"C:
a4 ca" in 20!= >,800 "er"erson
a4 ca" is a16uste1 e#er( (ear +( thea#era%e wa%e in1e4
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a4 ;a" ' istor(
@
Source: Whitman and Shoffner, The Evolution of Social Securitys Taxable Maximum !"#$$%
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a4 ;a" istor( 92:
0
Source: Whitman and Shoffner, The Evolution of Social Securitys Taxable Maximum !"#$$%
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a4 ;a" istor( 93:
Source: Whitman and Shoffner, The Evolution of Social Securitys Taxable Maximum !"#$$%
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Summar(= Social Securit(
ta4es Gearl( e#er(one "a(s Social Securit(ta4es
For man(, Social Securit( ta4es
re"resent the lar%est ta4 +ill in a (ear Social Securit( ta4es a""l( to a+out
!< of all earnin%s in the ?.S. econom(
In an( %i#en (ear, a+out !< of workersha#e income that e4cee1s ta4 ca"
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*asic facts a+out Social
Securit( Outlaysconsist mainl( of SocialSecurit( +ene-ts= *ene-ts 1e"en1 on the histor( of
earnin%s *ene-t formula is 1esi%ne1 to +e
"ro%ressi#e
*ene-ts are re1uce1 if claime1 +eforethe full retirement agean1 increase1 ifclaimin% is 1ela(e1 "ast the fullretirement a%e
*ene-ts are in1e4e1 to inHation3
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*ene-t formula A#era%e earnin%s of the +est 38
earnin%s (ears
)nl( earnin%s ta4e1 +( Social
Securit( count Gon'wa%e income 1oes not count
Income a+o#e ta4 ca" 1oes not count
Pro%ressi#e formula= @0< re"lacement rate for low income 9un1er
>0,300:
32< re"lacement rate for mi11le income
9>0,300'>!2,000:
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*ene-ts= full retirement a%e *orn +efore @3= was !8 *orn @73'@8= is !!
*orn after @!0= sche1ule1 to +e !
Peo"le can claim +ene-ts as earl( asa%e !2, +ut +ene-ts will +e re1uce1 +(as much as 30