GECON200-Topic #2: Saving for Retirement

The generation known as the “Millennials” or “Generation Y” is in a decidedly different position with respect to their prospective retirement than the generations that came before it (“Generation X” and the “Baby Boomers”). Those born between about 1980 and 2000 are part of a much smaller birth cohort than earlier generations like the Baby Boomers who have only recently begun to retire en masse.  Millennials are rightfully feeling pressure that they will have to not only fund the retirement of their elders through higher Social Security taxes, but also feel as though they will need to fund their own retirement. Seventy percent of Millennials are expecting to self-fund their own retirement, while only 41% of Baby Boomers feel the same way. Relying on Social Security might be a fallback option for many, but the current average monthly benefit is only $1,230, which is not even $15,000 per year. Consider that recent efforts in Congress have reduced the rate at which benefits increase, and you should expect the real value of Social Security benefits at your retirement to be much lower.

So, how much do you need to save to be comfortable in your own retirement? Fidelity and many others estimate you would need to save approximately eight times your final annual salary. While that might seem like a lot, if you want to get there you should start saving sooner than later. If you heard you would start working with a $40,000 annual salary when you graduate at 21, and have a $175,000 salary when you retire 50 years later, that might seem phenomenal, except for the likelihood that these represent the same real salary assuming a 3% rate of inflation. So, even under this rosy scenario, you would need to have saved $1.4 million to have a comfortable 20-year retirement. Furthermore, this savings has to be above and beyond any savings to buy a house, send your kids to school, start a business, have a rainy day fund, and at some point you might even want to take a vacation. How can you even think about making this happen?

Even starting early and passively saving might not lead you to the ‘promiseland’ of a comfortable retirement. Compound interest is clearly the best way to turn a little bit of money into a whole lot more. Unfortunately, this means starting early when you want to spend money or have to repay college debt. Furthermore, there are a lot of people out there who know that most people have little to no knowledge about how to invest their money even if they do save it. Those who rely on financial advisers and mutual funds to do the work for them have to pay fees which erode your growth rate, and leave many people with not much more than they originally saved. The Washington Post recently reported how difficult it is just to find out how much these fees add up to.

Some of you might take a decidely different approach, and look at the positive side of the increase in savings? In fact, it seems that Millennials are rather upbeat about the economy and savings when compared to other generatsions. Rather than rely on a wide-based social safety net, you now have the freedom to take responsibility for your own decisions. How much you have to save, what you will invest in, and when you will retire is now up to you! Where will all this savings go? What will it be invested in? It is impossible to know what new technologies will yield in the next 50 years or where the world will be, but you might look back at the success of earlier generations for some ideas. 

Finally, why was Social Security started in the first place? This program is not even 80 years old, but what was the world like before this? Were people saving for their own retirements with the freedom they had and minimal tax levels? Or did most people just work until they died? Or were people more reliant on their children to fund their retirement for them? Does the current Social Security system buy the Millennial generation some freedom to choose where they work, where they live, and how they live? Is the cost of Social Security worth the trade off?

Questions to answer are contained in the discussion above. Look to outside sources or the links provided here. There is no one answer, but please avoid anecdotes about your own experience. Form an opinion, back it up with facts, and be brief.

39 thoughts on “GECON200-Topic #2: Saving for Retirement”

  1. Before Social Security was pushed through Congress after The Great Depression, it was not uncommon to see people working right through old age. Even those who could not, relied mostly on family members rather than Government programs or retirement plans. Only a small percentage of the workforce held private or state pensions (Toner). Social Security was set in place in order to create a safety net for those who could not provide for themselves in old age and to prevent another recession as devastating as the last. Now, though, the program is become less of a net and more of a hammer. With those of the Baby Boomer generation retiring it is putting more pressure on current generations to both fund this program and make sure there is enough saved when they retire. While surveys are showing Generation Y as being enthusiastic about not having to rely on government payouts and being more active in their own savings (Fidelity Investments), there is still the question of if Social Security is worth it anymore? With monthly payments being around $1,230 (Official Social Security Website) now and only estimated to get lower, can we justify the current workforce paying taxes on a program they will most likely receive no benefit from? Survey’s might show enthusiasm for choice savings for Generation Y but it is likely in part because most people within this generation are aware that they will need their own personal savings to live within their standard of living as the Social Security payments are cut back. While it is important for the government to have a system in place to help those who need it the current Social Security program needs to be reassessed in order to not put a burden on those funding it if not entirely removed. In 1935, Roosevelt said “We can never insure 100 percent of the population against 100 percent of the hazards and vicissitudes of life,” . . . “But we have tried to frame a law which will give some measure of protection to the average citizen and to his family against the loss of a job and against poverty-ridden old age.” (Toner). It is time we get back to that way of thinking; where Social Security is used to help those who are in need and not every person who does not have enough money from their youth. After all, people lived fine before Social Security and with the early start of Generation Y on savings (Fidelity Investments) it is possible that the Social Security program, as it is today, will not be needed.

    Robin Toner: http://query.nytimes.com/gst/fullpage.html?res=9b0cefde1e38f930a15752c0a 9639c8b63
    Fidelity Investments: http://www.fidelity.com/inside-fidelity/individual-investing/fidelity-research-finds-gen-y
    Official Social Security Website: http://www.ssa.gov/policy/docs/quickfacts/stat_snapshot/

  2. Social Security was started due to the industrialization of America and the increase in average life expectancy. In 1790 the life expectancy in Massachusetts was 35 years old, in the time period between 1890 and 1930 the average life expectancy was roughly 60 years old. In the past, for the most part, people worked till they died since they did not live for that long. When Social Security was being in the process of being passed, with the average life expectancy being so high, many senior citizens could not afford to live if they did not work – forcing many to live in poverty or moving in with their children. Social Security was created to protect the senior citizens from living in poverty due to the increase in technology, health, and average life expectancy.
    http://www.ssa.gov/history/whybook.html
    http://www.wttw.com/main.taf?p=46,7,4,2

  3. According the Moeller of U.S. News, Social Security will run out of trust funds by 2038 and be forced to cut benefits by 19% in order to match payroll revenues under current legislation. The ratio of workers putting money into the system over those receiving benefits is falling rapidly due to the baby boomer generation aging.
    With the unemployment rate during the Great Depression spiking to as much as 25%, Franklin Roosevelt was left to resolve the problems of the elderly Americans with no way of surviving. He signed the Social Security Act in 1935 in order to counteract the effects of the Depression on the unemployed. Before Social Security the elderly would most likely work till death, depend on their children, or be forced to live in one of America’s 2,000 “poor homes” for the elderly.
    Millennials will be forced to live in places with a lower cost of living, to work the jobs they need as opposed to the ones they want, and to live a life of less luxury. Overall we’ll simply have less freedom as our choices will be limited to only the ones that will allow us to survive on what we make before retirement.
    The Social Security system is necessary to aide the elderly and retired. The system wasn’t designed for people to live solely off of Social Security, so for Millennials it’s vital to learn healthy saving habits in early adulthood or be limited to a lifestyle supported by Social Security alone.

    http://www.wttw.com/main.taf?p=46,7,4,2
    http://money.usnews.com/money/retirement/slideshows/the-future-of-social-security/6
    http://www.thegreatdepressioncauses.com/unemployment.html

  4. The SSA(Social Security Association) was created to help those faced with economic downfalls, with an emphasis on unemployment and old-age insurance. The issue is that the benefits aren’t really as great for current or future millennial retirees. The low payroll taxes and greater number of people back when social security was created, made it a greater benefit once they made it to retirement age, a lot of times netting them more returns in retirement than they paid in Social Security taxes out of their paychecks when they were working. Most people didn’t need to save that much money, when they were basically making money, or I would almost consider it interest, off of Social Security(SS taxes paid<SS benefits received). Our generation, with less working people, is left to pay higher taxes and less benefits because so many of these baby boomers are now retiring. This fact will/should greater the will power to save and invest in those generations after the baby boomers, that is, if they are smart.
    All that said, Social Security plays a much greater role than many typically think of. In the eyes of society, Social Security is to merely help retirees. Which those people do make up 2/3’s of the beneficiaries, however the other 1/3 of the money helps disabled worker families and single parent families in which a spouse has died from the financial burdens associated with such tragedies. You have to put yourself in their shoes and then ask yourself if paying Social Security is beneficial to you. Yes, the weekly, biweekly, or monthly paycheck cut may be hard a tough pill to swallow, but overall it is worth it in the end. For this reason I think Social Security is still a viable program and worthy of tax money. It is not an economic decision or concept many people would ever like to think about, but it should be thought about and considered when deciding your stance on Social Security.

    http://bigstory.ap.org/article/social-security-still-good-deal-workers

    http://www.socialsecurity.gov/pubs/EN-05-10024.pdf

  5. The topic of Social Security is a controversial one. “Generation Y” or the “Millennials” are being pressured to provide climbing Social Security taxes for the Baby Boomers generation’s retirement. Originally, Social Security was signed into effect on August 14, 1935 by President Franklin D. Roosevelt in response to several factors. The SSA historical website lists the Industrial Revolution, the urbanization of America, the disappearance of the “extended” family, and a marked increase in life expectancy as major changes to the America economy and work force. Yet even before the Social Security Act there were other programs in place to provide for poor old-age citizens such as civil war, company, and state pensions. Nevertheless, these systems were extensively flawed so the elderly depended largely on their families and communities for support if they decided to retire. During the Great Depression Roosevelt made this statement to Congress regarding Social Security: “This seeking for a greater measure of welfare and happiness does not indicate a change in values. It is rather a return to values lost in the course of our economic development and expansion . . .” Meanwhile, it can be proved that the Social Security program is unsustainable and Millennials should save to provide for their own retirement. In a 2013 annual report message to the public, the SSA directly states: “Neither Medicare nor Social Security can sustain projected long-run programs in full under currently scheduled financing, and legislative changes are necessary to avoid disruptive consequences for beneficiaries and taxpayers” Evidently, Social Security cannot be given 100% trust and should not be solely relied upon in any case.

    Sources: http://www.ssa.gov/history/briefhistory3.html
    http://www.ssa.gov/oact/trsum/
    http://www.cato.org/publications/policy-analysis/still-better-deal-private-investment-vs-social-security

  6. After WWI came to an end, unemployment rates became an all-time high with national income dropping by 43%. By about the mid-1930s, the lifetime savings of millions of people became absent. The Social Security Act (signed by FDR on August 14, 1935) was implemented during the Depression, an age where poverty rates among senior citizens surpassed 50 percent. The Social Security Act provided a federally administered system of social insurance for senior citizen provided through payroll taxes paid by employees and employers. Under this system, workers would earn retirement benefits as they worked. Before the Social Security Act was passed, most workers worked until they could work no longer, while more fortunate workers stopped when they reached sufficient funds so they could live the rest of their lives at leisure. So is Social Security worth the trade off? Stephen Ohlemacher from the Huffington Post states that retirees on 1960 got about seven times more than they paid in Social Security taxes and retirees on 1985 could expect to get more in benefits than they paid in Social Security taxes. He states it is not this way anymore. He states by saying an average married couples paid about an average of $598,000 on Social Security taxes during their career, but only received $556,000 in benefits. As Social Security benefits remain progressive, many low-income workers will receive slightly more benefits today, while high-income workers started getting less benefits. In conclusion, it is worth the trade-off only for low-income workers as they receive benefits (although small).

    http://www.huffingtonpost.com/2012/08/05/is-social-security-still-good-deal_n_1743564.html

  7. Despite negative views of the economy, Millennials are, in fact, optimistic about the future. This is, in part, a result of the rapid advancements in technology and a strong emphasis on equality. The vast amount of available information is incomparable to that of previous generations, which is leading to an informed society. This new generation is more invested in its future and has a sense of efficacy boosted by a strong ideal of independence and a trend leaning towards liberalism. How does this relate to Generation Y’s view on Social Security? It has given them a stronger belief of the role they play in their futures. The “safety net” of Social Security, though it will always be there as long as there are elderly people to vote in its favor, is becoming outdated in the minds of the younger generation. Generation Y’s belief of “we can do anything” or “yolo”, though maybe overly optimistic, is leading to a confident group of younger people who are beginning to invest in their future by their own means, rather that allocating the task to someone else.

    http://articles.latimes.com/2014/mar/07/news/la-pn-millennials-liberal-views-pew-poll-20140306

  8. It seems extremely difficult to believe that Social Security will exist in the same form as it does today when the Millennial generation hits retirement age. The graphic from NPR listing the breakup of government spending in the past 50 years shows that in the first 25 years from 1962 on, Social Security spending increased over 7 percent, which almost certainly adds up to an increase of billions upon billions. In the 24 years from 1987 on to roughly present day (2011) on the graph, spending has remained almost constant at that level and the wave of Baby Boomer retirements is not even close to fully represented there. Even more confusingly, a 2011 article from the Huffington Post mentioned that recipients of Social Security received a boost of 3.6% in benefits in 2012. The increase in spending today while all fears about the system collapsing in the future due to lack of funds seems almost backwards. Finally, while many articles suggest that a good portion of the Millennial generation is optimistic about the situation and believes that their fate is in their hands, the all-time high student loan debts and staggering young unemployment rate (13% for the 18-24 age group in Jan. 2014 according to a Washington Post article) makes the solution of self-funded retirement to circumvent the Social Security problem seem almost impossible. How can it occur when so many Millennials are broke, unemployed, and in debt in the prime of their lives? If the unemployment can be curbed then the most likely outcome seems to be making Social Security far more supplementary to future retirees that it is currently.

    Sources:
    http://www.npr.org/blogs/money/2012/05/14/152671813/50-years-of-government-spending-in-1-graph
    http://www.washingtonpost.com/business/millennials-money-misfortune/2014/03/13/c6659b1e-aa17-11e3-9e82-8064fcd31b5b_story.html
    http://www.huffingtonpost.com/2011/10/20/millenials-social-security_n_1021602.html

  9. Many people believe that Social Security benefits will be depleted before they reach the “Millennials” or “Generation Y.” However, social security will still be around but not benefitting people to the degree that it is now. With the Baby Boomer generation coming upon the retiring age, the funds for Social security are going to be used exponentially faster than they would be with a normal sized generation. Experts from the Heritage Foundation claim that, “Early recipients of Social Security received more than six dollars in benefits for every dollar paid in Social Security taxes. Today and in the future, recipients will receive less than a dollar in benefits for every dollar paid in Social Security taxes.” Therefore, the “Millennials” will have to fund most of their retirement, other than the few benefits that will be left for them in the Social Security fund when the time comes. This may provide that generation with more freedom to invest their money and save for retirement. People who are knowledgeable about investing have the possibility of making more money on their retirement investments than anything social security could have ever provided them. There is potential for greatness with more freedom giving to the “Millennials;” however, they must understand how to invest and grow their retirement investments now so have money for their future.

    http://blog.heritage.org/2014/04/14/one-wants-admit-social-security-taxes/

  10. Social Security was created by President Franklin D. Roosevelt’s New Deal Program and run by the Social Security Administration. The Social Security Act was created “to provide for the general welfare” in order to help the elderly, unemployed, and children. Before Social Security, some people had pensions, but most people supported themselves by working through old age. According to the 1930 census, 58% of men over 65 were still working, where in 2002 it was 18%. They relied heavily on their children, who carried the burden of supporting the elderly. The Great Depression meant that there were no longer jobs for the elderly, and people’s pensions disappeared. Millennials are more likely to have bank accounts, real estate investments, and retirement accounts than the rest of the population. But they have extremely high levels of personal debt, with more than half with student loans and about 40% have mortgage debt (about one third owe more on their home than what they could sell it for). It will be harder for Millenials to save for retirement with these kinds of debts. Baby Boomers weren’t great with money either, but they have Social Security to provide a safety net. The Baby Boomers are also retiring, reducing the number of workers to contribute to Social Security. They are expected to live longer meaning that they will collect benefits for longer. Parents are also not having as many children, which limits the amount of new workers. Therefore, the system will need to cut benefits to retirees in the future, creating less of a security net than the current average monthly benefit of $1,230 a month. In order for Social Security to be worth the cost, lawmakers need to make changes to the system because self-funded retirement is very difficult even to the Baby Boomers retiring now.

    http://www.ssa.gov/history/35act.html
    http://www.nytimes.com/2005/01/23/weekinreview/23tone.html
    http://time.com/55672/your-kids-are-better-with-money-than-you-are/
    http://www.washingtonpost.com/blogs/fact-checker/wp/2014/01/08/social-security-a-guide-to-critical-questions/

  11. According to US News: Money, Social Security is said to change in 2014. Such changes include a larger payout, higher tax caps, and bigger earnings limits. A larger payout will occur due to the higher cost of living. A higher tax cap is prevalent as well, capping at $117,000, so about six percent of 165 million workers will pay higher taxes. Lastly, the earnings limit applied to by a retirees 66th birthday will no longer apply and any amount of money can be earned without penalty.

    Social Security was started for the basis of retirement and lifelong earnings for living after retirement age. The new changes brought about in 2014 is both detrimental and beneficial. Social Security is designed to help the retired, not compensate the entire rest of their lives. It’s used as a form of assistance, not yearly salary. In the past, I would assume people used their savings account or a fund to compensate for their future life. Social Security is government based, for taxes and earnings. The increased benefits for 2014 pose no problem for the future lives of the retired.

    http://money.usnews.com/money/blogs/planning-to-retire/2013/10/30/how-social-security-will-change-in-2014

  12. Social security was started for a number of reasons. The first of these is because the average life expectancy increased greatly since the founding of our country due to advances in science and medicine. After all, if you were going to die somewhere between the ages of forty to fifty, then you could work for the vast majority of your life. Next, one must take into consideration the time period at which social security was passed. In 1935, the United State was experiencing the worst economic recession in it’s history, and current president FDR instituted it and several other programs to promote socialism and more government control over the economy. Finally, social security is what helps to separate the United States and other first world countries from third world countries. In the younger years of our country, social security wasn’t as necessary because of shorter life expectancy, lower cost of living, and social norms. Like previously mentioned, with a shorter life expectancy, people could work for a higher percentage of their lifespan. Next, the combination of lower taxes and appliances contributed to a lower cost of living. It would have been easier to live off personal savings because we didn’t have things like laptops, cell phones, and other devices that are both expensive, and hike up energy bills. Finally, it was way more common for elderly parents to live with their children. Without having to pay for housing and in some cases food, living off savings would be much easier. I would say that the cost of social security is worth it for some, but not worth is for others. For instance, my grandmother gets the benefits of social security, but never worked and lives off my grandfather’s payments. However, people like Bill Gates could probably live off his own savings and therefore won’t need social security payments. As for the millennial generation, social security has the potential to go either way. The current issue is that the large amount of baby boomers are demanding a lot of benefits and the current working force is struggling to provide this. It’s possible, though, that there will be another huge growth in the population soon, and they will pay in enough money to provide benefits to the millennial generation. However, that most likely won’t happen and it’s also highly possible that the government won’t let us retire until age eighty.

  13. Social security was mainly developed and incorporated due to people living longer. Before Social security, life expectancy was low, so the majority of people would work until they died. When the life expectancy in the United States grew to about 85, it was harder for older people to continue working past a certain age. Social security was then introduced to provide retirees with money for their retirement. Social security was a great idea, but it does not seem as if it will hold up. The “Millennials” or “Generation Y” are at an extreme disadvantage when it comes to the benefits they will receive from social security. With improvements in medical fields, the life expectancy will continue to rise and generation Y will live longer. Living longer will mean a longer retirement and more money needed for a comfortable retirement. The millennial generation already does not seem to have a good grasp on how to manage their personal finance. According to a paper “Saving for a Bleaker Tomorrow” by Michael Finke, millennials only had 2.5 months of income accumulated in 2007. Since this generation doesn’t seem to be good at saving money, it will hurt them even more when you include fewer benefits they receive from social security. Social security will not be able to continue to provide retirees with a comfortable retirement under its current structure. Due to things like rising taxes, increasing public debt, asset yields, and reduced economic growth, millennials will have to save more than any previous generation in order to have a comfortable retirement. In the end, social security will not be able to provide millennials with enough money for them to retire. Millennials must realize now, that saving money is something that will become necessary for them. If this generation does not learn how to save, they may not be able to retire comfortably due to the benefits of social security not being adequate enough for them.

    http://www.marketwatch.com/story/three-ways-to-help-millennials-save-for-retirement-2014-04-12

  14. Early recipients of Social Security received more than six dollars in benefits for every dollar paid in Social Security taxes. Today and in the future, recipients will receive less than a dollar in benefits for every dollar paid in Social Security taxes. The money taken for Social Security is better off in our own pockets. The average American would be better off if they just put the money in a savings account instead of paying it into the failing program.
    Since 2010, Social Security has had more cash expenses than cash receipts. By 2011, the negative cash flow added up to $55 billion. The Pew Research Center concluded that Social Security could make payments at this rate until 2033. This leaves the government with really only two options: scrap the program or reform the program. Both options will leave my generation with less money than we put in. Social Security is a sinking ship. We all know its going down but no one wants to jump into the water to save themselves. It’s time my generation makes the switch to completely depend on a private retirement system. We all have put in a significant portion of our income towards social security that we may never see again if Congress decides to scrap or reform Social Security. Privatized retirement programs can provide less risk and higher rates of return. It’s high time we jump off this sinking ship.

    http://blog.heritage.org/2014/04/14/one-wants-admit-social-security-taxes/

    http://www.pewresearch.org/fact-tank/2013/10/16/5-facts-about-social-security/

    Learn Liberty Informational Video: https://www.youtube.com/watch?v=PLTfOAYfbao

  15. The Social Security Act was signed in August of 1935 by, the then president, Franklin D. Roosevelt. It was pushed and influenced by the harsh effects of the Great Depression. The Great Depression left America with a frighteningly fragile economy. Therefore, Roosevelt signed the Social Security Act that was designed to benefit retired citizens by providing them with a certain amount of welfare each month. Before the Social security Act it wasn’t uncommon for Americans to work until their death. While others prepared for retirement by having state pensions that provided them with a fixed amount of money to be paid to them at the time of retirement. Many also relied on their family to take care of them. It was normal for families to take in their elders and take on the financial responsibility that came along with them. In an article by Robin Toner called “’A Great Calamity Has Come Upon Us’” she quotes a report by the Roosevelt administration panel that said, “Several of the state surveys have disclosed that from 30 to 50 percent of the people over 65 years of age were being supported in this way.” Current Social Security limits the freedom of the Millennial generation. It controls our decisions mainly due to the fact that Social Security is running out of money. It causes us to realize that we need to start planning on our own and start saving for our future. Meaning setting aside money in a savings account or investing for our retirement. The Millenial generation is paying for older generation’s retirement on top of trying to pay for their future retirement. This in return has an impact on what we do with our money i.e. where we live, how we live, etc.. The cost of Social Security is not worth the trade-off. Gary Foreman in his article, Millennials and Social Security, quoted a quote by the chief actuary of the Social Security Administration. It said “Social Security is no in imminent danger of running out of money, but it faces a financial crunch a bit further out – around 2035. That is when Social Security’s Trust Fund is projected to be exhausted due to the drawdown of benefits by the baby boom generation.” The millennial generation will ultimately be paying more money than they will see in return.

    http://www.nytimes.com/2005/01/23/weekinreview/23tone.html
    http://limaohio.com/apps/pbcs.dll/article?avis=LI&date=20120118&category=news&lopenr=301189922&Ref=AR
    http://stretcher.com/stories/12/12apr30m.cfm

  16. Social Security was first enacted in 1935 during the Great Depression. Its original intention was to give assistance to many families, not deal with the economic issues like it is thought to now. Present day, Social Security is one of the main ways that people have economic security in old age. Nevertheless before Social Security there were other ways people made sure they were economically stable once they stopped working, mainly family and charity. In Ancient Greece people invested in olive oil, and in medieval Europe the feudal system provided economic protection. And once nations began industrializing and most people lived in cities, guilds were the main source for benefits.
    Even though Social Security wasn’t put into law until 1935, there were a few precursors that were very similar to the way we run Social Security now. The English Poor Law of 1601 was the “first law where a state was responsible for the welfare of its citizens.” Then a little bit later in history was the first real precursor to what we currently know of as Social Security. The Civil War Pension Program gave money to widows of soldiers and to soldiers who were unable to work after the war because of amputations or injuries. The way the money was taxed and given out is very similar to how Social Security is received today.
    While Social Security does give people money in old age to be able to live without having to work, there are many restrictions it places on people. Social Security only pays people about $15,000 a year, which is just about what full-time minimum wage workers earn. It is calculated that the average person is going to need to save up around eight times their average working salary to be able to live comfortable once they retire, especially since Social Security will pay them so little. Because of the monetary restrictions, people really don’t have that much freedom to live where they want and how they want on Social Security because they can’t afford to. The previous statement is true for the Baby Boomers now, and will be even truer for us Millennials, especially because of the dwindling trust fund of Social Security from the Baby Boomers.
    In essence, Social Security is a Ponzi scheme that the government runs. While it is a Ponzi scheme that benefits thousands and thousands of people all across America, is still somewhat of a Ponzi scheme nonetheless. The government pays the current receivers of Social Security from the contributions (taxes) of people who are currently working. However, I am not at all saying that we should get rid of Social Security. It is a necessary program that just needs to be reviewed and edited. Social Security will be worth the trade-off once it is adjusted to ensure its longevity and pay to all those that deserve it once they retire.

    http://www.ssa.gov/history/briefhistory3.html
    http://eds.b.ebscohost.com/eds/pdfviewer/pdfviewer?sid=046769d5-6d48-4f7a-8217-3d872f820b29%40sessionmgr113&vid=2&hid=115
    http://www.washingtonpost.com/business/a-guide-through-the-complexities-of-401k-fees/2014/04/12/3b828468-c249-11e3-9ee7-02c1e10a03f0_story.html
    http://www.cbsnews.com/news/will-social-security-run-out-of-money/

  17. Social Security was necessary during the Great Depression because the economy had depreciated so much that men and women could literally not afford to save any money. White men were working for wages as low as $1 dollar a day, women and African Americans made even less. The lack of a savable income, jobs that paid proper wages, and the exasperated economy is what led to Social Security. The cost of Social Security is, to an extent, a good trade off. It is good because it allows for our parents to have a safety net to fall onto once they are retired. Our parents are the people who take care of us while we are young, they spent the money that would have gone towards their retirement on us, so is it not then up to us to take care of them once we are capable of doing so? The amounts being taken out for Social Security are so minimal that they really should not be affecting anyone in a “make it or break it” type of way. Although the “Millennial” Generation may never see a cent of the money that we are paying today in Social Security, this money is going towards our loved ones, and simply for that reason, Social Security is a good trade off.

  18. To begin, the Fidelity study on generation Y being optimistic does not seem accurate. First, it is misleading, because it defines generation Y as being born from 1981- to 1988, while the blog entry defines it as 1980-2000. The “blog generation Y” (1980-2000) seems to be optimistic about the economy improving as a whole, but this is expected as a recessionary period always leads to a period of gradual growth. However, I would fare to say that most of my generation believes that we will be working until we are 70 or higher. To illustrate, one gets out of college at age 22, assuming they get a job right away they will have student loan debt and housing to pay for. These are two financial burdens that almost put the graduate back to where they started before entering college, financially. However, the recent graduate will likely buy things they want and don’t necessarily need just for the reinforcement that their hard work has not gone to waste. All of this does not even take into account a retirement fund. Many college students have the mentality of “why start a fund now if almost no money will go into it, I’ll just wait until I have substantial income.” However, substantial income may not come for a number of years even after graduation and full time employment. The upside to the baby boomers retiring is that a massive amount of jobs should open up for the younger generation, thus giving them more income and financial, not social, security. The increase in overall income to the young generation would offset the higher cost of social security taxes. This, coupled with the economic growth that should happen in the coming years will keep the system afloat. However, this scenario relies on a lot of factors lining up just right, and as we have learned that rarely happens in our economy.

    http://www.fidelity.com/inside-fidelity/individual-investing/fidelity-research-finds-gen-y

  19. Prior to Social Security, living standards and the way of life was different is many ways than it is today. People during this time relied heavily on their families when they grew old and could longer work anymore. This time period was based manly around agriculture so the elder had the ability to help their families out with tasks around the farm as payment for taking care of them and allowing them to live in their houses. However, once the Great Depression hit, life drastically declined for older people who could no longer work anymore. Since people lived off of their agriculture they held all of their earnings in the form of cash. So, when the Great Depression hit they lost it all. Men and women who had retired became penniless and were unable to earn any more money considering companies refused to hire older people that could not work as well as people who were younger. Because of this disaster, Social Security was formed in order to provide money for people who had retired and could no longer make the money on their own. Now, people are able to leave their jobs knowing they are going to have some money to fall back on from the government. However, people who plan on retiring at any point in their lives need to start saving now because the government supplied money will not be enough. It will help with living, however, in order to live comfortably people must rely on their own savings as well. Generation Y must put their current tendencies aside and learn to save money now if they desire comfortable living standards once they retire in many decades.

    http://www.ssa.gov/history/50mm2.html

  20. According to the Social Security Administrations website, the program was started as a part of the Committee on Economic Security in 1934 by President Roosevelt. This was developed as a “comprehensive social insurance system covering all major personal economic hazards with a special emphasis on unemployment and old age insurance.” More specifically, the Social Security Act developed the Social Security Board in 1935 and was eventually placed under the Federal Security Agency. This program was initially started as a means of bringing the country out of the Great Depression. Before Social Security began, it was not uncommon for people to work straight through their retirement age. Before the Great Depression, people could save some money for their retirement or depend on their children for assistance once they were grown. But when the stock market crashed and the economy crumbled, it would have been easy to make a case for the approval of Social Security. Many old people could not retire or find jobs they were able to keep as they aged. Their children were not financially stable enough to care for themselves, their own children, and their parents. Many younger people were stuck living near their parents to help provide for and take care of them. This is partially why Generation Y is upbeat about the economy and paying into Social Security. It may not be there to fund their retirement but their parents won’t have to look to them for assistance as much as they move into retirement age.

    http://www.ssa.gov/history/orghist.html
    http://www.nytimes.com/2005/01/23/weekinreview/23tone.html?_r=0

  21. The cost of social security limits the freedom given to Millennials. If the generation is still required to foot the tab for Generation X and the Baby Boomers retirement Millennials’ income is decreased accordingly. The previous generations feel entitled to their social security (rightly so) as they have paid the dues and expect some return. This is a cycle, which cannot end unless everyone is paid off. According to an article on Forbes in 2013, Millenials are the least likely to even be saving for their retirement. This suggests that the Millenials are another step in the cycle. Work, pay dues, retire, collect dues.

    The social security system was implemented in a different time. In 1935 when the system was created (aarp) America was coming off of the stock market crash. Elderly people were eating cat food. Unemployment was through the roof and the American people were facing the worst recession that would be seen until arguably 08-09.

    Sources:

    http://www.forbes.com/sites/maggiemcgrath/2013/10/02/are-millennials-the-lost-retirement-generation/

    http://www.aarp.org/work/social-security/info-08-2010/social_security_timeline.html

  22. While there were funding programs after the Civil War to fund disabled veterans, Social Security was brought to America in the 1930’s to combat the Great Depression. With the life expectancy constantly increasing and the poor economic conditions ahead, people could no longer survive on their own savings as millions of Americans were out of work and did not have enough money to feed their families. And for years, Social Security has helped millions of people survive after retirement. But as a millennial today, it is a system that does not look promising for the future as it is projected to be solvent until only 2033. While there may be some reform solutions such as reducing benefits for upper income recipients and raising the payroll tax rate, nothing is certain and each solution has its pitfalls. So it simply comes down to finding the best future investment strategy, starting at a young age. So what should we invest in for the future in order to have a plentiful retirement? First, stick to the basics and invest in successful companies with proven products that have lasted such as Coca Cola and McDonalds. There have been countless efforts to compete with these companies over the years and despite the competition, companies like these stay on top and there is no evidence to suggest they won’t on top for many years to come with their proven products. Secondly, invest in future technology such as biotechnology and alternative energy. Investing in a “green” future and in technology is simply investing in the future. But the key is to start investing at a young age without the aid of financial advisors who take away from your return. Becoming knowledgeable about the markets and investing in past staples, as well as the future potential is the only way to avoid the deteriorating social security payments and have a successful, plentiful retirement.

    http://money.howstuffworks.com/personal-finance/financial-planning/social-security6.htm

    http://www.wobi.com/blog/future-industries/top-5-fastest-growing-industries-future

    http://www.nytimes.com/2013/03/31/opinion/sunday/social-security-present-and-future.html?_r=0

  23. After finishing reading this article, I have received some information about the saving for information. Like the article said that, “Seventy percent of Millennials are expecting to self-fund their own retirement, while only 41% of Baby Boomers feel the same way.” Also, the Chief Executive Officer (CEO) of the BlackRock Inc. Laurence Fink, said the “This crisis of confidence is a result not of passing trends, but of powerful forces that are transforming the global system.”
    It’s true for the factors affect us to save money for our retirement. The most reason is absolutely trust problem, but it was generated by the invisible power which is changing the world pattern. Further, the other problem perplexing us is an ageing population. The UN forecasts that the over-60 age group will triple in size to 2bn by 2050 – more than twice the rate of global population growth.
    In addition, the purposes of saving money are buying house, sending our children to college and fund our parents, so on. However, most of us hope the Social Security is helpful for our life after retirement. Of course, we should pay the money by ourselves for our future life after retirement, but it should base on the income level of ourselves which has enough money to meet those purposes in our life.
    Deleveraging is compounding this systemic disruption as governments, the financial sector and individuals reduce debt in the wake of the financial crisis. This is depressing housing markets, slowing consumer spending and will shape investment and returns for years to come. At the same time, jobs and economic opportunity are migrating to emerging markets. In developed and developing countries, those less adept at navigating a global economy are being left behind, fuelling income disparity and social unrest. Over time, this shift of economic opportunity will help create a more stable world, but for now it is fuelling anxiety. We need that money working again to fund retirements and drive economic growth. Very simply, we need to turn today’s short-term savers into long-term investors. We must convince individuals to start investing for their retirements now and help them go beyond the old 60/40 mix of stocks and bonds, which will not deliver the returns they need at today’s low yields.
    According to the idea of Laurence Fink, the transformational challenges and resulting crisis of confidence we face are daunting. But more than ever before, we possess the knowledge and experience, the financial and planning tools, the technology and analytics and the global connections to respond. So, I think that Companies have a moral responsibility to help both full-time and part-time employees to save enough. That responsibility is not absolved when companies shift from defined benefit to defined contribution plans. With either type of plan, employers should provide more transparency about the income employees can expect in retirement. It will be practical and useful for people to save money and make the plan for their income even their consumption so that they have the better base to expect their future life after retirement. In the meantime, we need a tax structure that encourages long-term investment: so the holding period for an investment to qualify for long-term capital gains tax treatment should be extended to three years, from the current 12 months, and the rate should decline the longer the investment is held. The corporate sector needs to be willing to make concessions to achieve that goal.

  24. Social Security Act was signed into effect August 14, 1935 by FDR. Monthly benefits didn’t start until January 1940. The Social Security Act established a system of old-age benefits for workers, benefits for victims of industrial accidents, unemployment insurance, aid for dependent mothers and children, the blind, and the physically handicapped. After the Great Depression many families found themselves in financial ruins. Before Social Security those who retired were often faced with poverty, this then led to the elderly working longer. For example, in the 1930 census 58% of men over 65 still in the workforce; in contrast, by 2002, the figure was 18%. Alternatively, seniors could become a superannuated worker; someone kept on the payroll with reduced responsibilities and reduced pay in lieu of pension or join an institution. Around America institutions known as “poor houses” were being established, a “poor house” was a place where old folks were sent for the crime of being old and poor and unable to support themselves. Additionally, the responsibility of taking care of the elderly fell on family members, however, after the depression many families counted support their parents plus their own families. In a letter to FDR a women wrote, ”I thought as long as I lived there was no need to worry about her being taken care of, but I never dreamed of a depression like we have had.” Social Security has been working, however, with people retiring earlier and requiring more benefits. Forward to 2014, the millennial generation needs to think about their future. They will have to invest and save, they will not have the luxury of working any job they want but to work the job the need in order to survive. There needs to be a balance of working without living and saving enough to enjoy life. I am not sure where the balance is, but those who do not think about and start learning the basic of saving will not be okay, regardless of what happens to Social Security.

    http://query.nytimes.com/gst/fullpage.html?res=9b0cefde1e38f930a15752c0a9639c8b63

    http://www.wttw.com/main.taf?p=46,7,4,2

  25. Why was Social Security started in the first place?

    During the Great Depression in the United States, about 50% of the elderly were in poverty and literally could not buy food to feed themselves. Any money that Americans had saved was made almost completely value-less by the stock market crash of 1929 and therefore the U.S. Government was in quite a pickle. President Franklin Delano Roosevelt signed the Social Security Act on August 14th, 1935 in order to fix these problems. The act would assist the retired and the unemployed by taking money from payroll taxes and from employers over the course of people’s careers and gave these citizens a source of income during their retirement.
    http://www.ssa.gov/history/hfaq.html

    What was life like prior to Social Security?

    Before Social Security was created, over half of the men that were over the age of 65 were still working. Compare this to in 2002 where only 18% of men over 65 were working. People today would be shocked at those numbers. Sure, some people relied on pensions from state jobs, but most people just worked continuously to have a steady income. Also, before Social Security, people relied on their families. Children had the responsibility to support their parents when they got to old to support themselves.
    http://query.nytimes.com/gst/fullpage.html?res=9b0cefde1e38f930a15752c0a9639c8b63

    All in all, the problem with Social Security is that unlike a private firm, the law has no hold on the Social Security Administration. If a private firm were to change the terms of the original deal you made with them in any harmful or fraudulent way that would negatively affect you (Aka. Bernie Madoff), he would be put into the hands of the law. But you can’t sue the Social Security Administration. The truth is that most people think that the money that the government is taking from them is getting placed into a little account specifically for them. This is not the case, and more importantly, people have to know that although that money is technically guaranteed to them, the status of the economy can and will affect the “deal” that they have with the government. Therefore, save other ways like bonds, private investments, and careful purchases and sales in the stock market and if you can, keep working for as long as you can, because this Social Security Program, although very positive in nature, could really hurt you in the end if you are not carful. SAVE SAVE SAVE!

  26. The Social Security program was implemented in the 1930’s to help people out during and after the great depression so people wouldn’t have to work until they died. Or at least this was the idea of it. It worked for a while, but is catching up with itself fast as the ratio of people providing for social security is falling rapidly due to about 10,000 baby boomers qualifying for social security each day and technology and health advancements leading to a longer life expectancy. Today, the Millennials are paying a cut from their income to fund the baby boomer’s social security, but will not be able to participate in collecting the same benefits when they retire. By the time generation Y does retire, they will collect less money per dollar than they paid into social security. The Millennials are at a major disadvantage when it comes to collecting their social security, as estimates project the return on this investment to be much lower by the time they reach retirement age. Then it will continue from there as the next generation will expect social security (as they should) and will not end up getting what they deserve.

    This is a never ending, unsustainable, cycle that will catch up with itself in the near future. In fact, it is estimated to only be able to pay out at the rate it is today until 2033, when they are expected to come up short of benefits by 23%. Then that leaves the government with only a couple options, they could reform the program, or get rid of it all together. If social security is to stay, then major changes will have to be made to the current program. Some of which will include, raising the retirement age, decreasing benefits, and increasing tax from income. If they do away with social security, then incomes will rise as a result from social security not being collected, and then that extra money could then be invested to create more wealth and people could retire on their own.

    http://spectator.org/articles/35653/millennial-perspective
    http://www.cbsnews.com/news/will-social-security-run-out-of-money/
    http://www.nytimes.com/2013/03/31/opinion/sunday/social-security-present-and-future.html?_r=0

  27. Due to the Great Depression, the stability of “wealth” that people housed their assets in for preliminary savings towards retirement (pensions, employment, the stock market, and private savings) had completely collapsed. A separate system had to be devised to provide financial stability for retirees to be able to live out a sustainable retirement without worrying about poverty or the basic costs of living after exiting the labor force because welfare could not be compromised because of a potential future economic recession or depression as great as the Stock Market Crash of 1929. Social Security was signed into effect by FDR in 1935 and the first benefits were paid out beginning in 1940. Currently, out of the 158 million Americans that pay into the social security system, 57 million Americans receive social security benefits. This number has increased substantially since FDR initially signed the SSA into law because before the first payments went out in 1940, in 1939, FDR amended the SSA to include spouse and child “survivor” benefits. In 1956, this number further increased when disability benefits were added into social security taxes.

    Up until 1975, the SSA lists women as receiving more social security benefits than men. Before this point, women did not have as much overall lifetime income because social stigma saw women as family caretakers as opposed to part of the workforce. This is because the SSS (social security system) is progressive and is supposed to yield higher real wage benefits to those who earn less. In 2012 however, the average annual SS income received by women 65+ was $12,520 compared with $16,398 for the average male 65+. This is a demonstration of how the real wage of social security benefits for women is decreasing over time due to inflation and the real cost of including things like Medicaid into Social Security benefit payouts. I don’t believe our social security system is progressive, but regressive – social security reflects REAL lifetime earnings and does not compensate for gender disparities in the workforce today. Women also have longer life expectancies, so I have very minimal hope for my own net benefit from social security, which is why accounts like IRAs (Individual Retirement Accounts) have been developed, yielding higher risk (can’t access money till age 65) but more interest in compensation (yielding some of the highest real interest rates compared with CDs today).

    http://www.nasi.org/learn/socialsecurity/overview
    http://www.ssa.gov/policy/docs/statcomps/supplement/2010/2a20-2a28.html#table2.a27
    http://www.ssa.gov/pressoffice/factsheets/women.htm

  28. Most of the individuals taking Intro to Macro are not even twenty years old, many do not have jobs, and thus, retirement is nowhere near to being in the picture. With all that said, it would be a wise decision to begin thinking about retirement and begin saving as soon as possible. I think that many people are not well educated about the system of Social Security, and that is a big reason for not saving. First off, Social Security was established in 1935 as a system of benefits and aid to those of old age, handicapped, and victims of unfortunate circumstances. The key part people need to understand is that it is not anything substantial, as the article says, benefits and aid are not supposed to be the only thing a person lives off of. In fact, aid is technically only to be for a period of time until one recovers, adjusts, and adapts to the new situation. The idea that one can live off of Social Security is obviously a misconception if you can understand that part…no one just lives off their job benefits or bonuses, they have a base salary and when talking about retirement, that is savings, IRAs, CDs, etc. I think Social Security gave many people a false sense of financial security and allowed them to be irresponsible with spending choices. It seems to have created a new, heavy dependence on the government to provide for the people. As Rome gave the people bread and circus, the people became overly dependent and things began to collapse in on themselves. I think the horror stories of the pass generation has made our cohort realize that we can’t depend on the government for much assistance and must take responsibility for our financial futures, by putting money away as soon as possible.
    http://www.archives.gov/historical-docs/document.html?doc=14&title.raw=Social+Security+Act

  29. In the post Great Depression era around 1935 their was great concern for what the millions of elderly and/or retired Americans would do after losing everything. The solution to this problem was The Social Security Act, which Franklin Roosevelt signed in 1935. The program was/still is intended to be a social insurance program providing economic security to our citizens. Before this program was around many people relied on family members to take care of them, had pensions through their employer, or continued working to support themselves. An article from the New York Times states, “Before the creation of Social Security, some Americans had private or state pensions, but most supported themselves into old age by working. The 1930 census, for example, found 58 percent of men over 65 still in the workforce; in contrast, by 2002, the figure was 18 percent.” This statistic shows that since the creation of Social Security the number of elderly people in the work force has drastically decreased. While the system has proved effective the extent of the repercussions were not clearly thought out when this system was established. As we progress into the future something has to be done to change the way social security operates due to the increasing number of people dependent on social security and the decreasing number of people supporting social security. In an article from CBS news they claim that, “Since the 1960s, the birth rate has declined by about one-third, from three children per woman to two.” They also state that this will cause the “age dependency” ratio, defined as the number of people in the Social Security population age 65 and older, compared to the number of people in the Social Security population who have the potential to work and support the system by paying taxes, is expected to increase by 15%. In the long run what all this means is that the social security system will not be worth the trade off for the Millennial generation because they will have to pay more to keep the system operating than they will receive in benefits.

    http://www.cbsnews.com/news/the-real-reason-behind-social-securitys-problems/
    http://query.nytimes.com/gst/fullpage.html?res=9b0cefde1e38f930a15752c0a9639c8b63

  30. Social security is a system that protects our elderly from poverty, providing a bare minimum salary to get by. After 75 years, the system still does this but unfortunately is showing signs of weakness. Many questions remain to be answered especially with ever rising costs of the program and an also large amount of government debt (lawyers.com). One question is out of the picture indefinitely; weather or not we should abolish Social Security. Before the program was a time of uncertainty and calamity, a time where wealth could evaporate and the elderly could be left to live in poverty (Toner). In the 21st century these problems still exist but not at the same extent of the pre-Social Security era. For example only about 18% of people over 65 still work from a 2002 study. In comparison, before Social Security, about 58% of that same age group worked to help finance their lifestyles because they had no retirement fund in place (Toner). Social Security has brought happiness to millions of people but as America continues into the 21st century the program is going to have to evolve. Anything that cannot adapt will go instinct. Millennials are at a crossroads because of the inability of congress to choose a path for Social Security. Until then, the younger generation will have to be wearier on how they spend their money and take a more active interest in their own futures rather than having the government do so. The current problem is that Millennials are paying into a system they may not wreak the rewards of, in turn causing them to have less money to invest into their own futures. To fix the problem the government needs to find a way to lessen the cost of Social Security because by 2016 the program will no be able to support its self. Furthermore, by 2037 benefits will have to be rolled back to only 74%; a drop of 36% (lawyers.com). At this rate by the time Millenials retire everything they do will have to be watched with more attention if Social Security fails.

    http://econstudentview.aneveu.com/?p=578#comments

    http://query.nytimes.com/gst/fullpage.html?res=9b0cefde1e38f930a15752c0a9639c8b63

  31. When Franklin Roosevelt created the Social Security program in 1935, it set the stage for modern retirement as we see today. According to WWTW, a public media organization in Chicago, only about 5% of elderly citizens in America had any retirement pension in 1932. Back then, people either worked until physically impossible, became a “superannuated” worker which had reduced pay and responsibilities, were forced to retire, or became institutionalized in poor elderly homes. The reason for social security was mainly because of the Great Depression of the 1930s. There were also other smaller reasons that contributed such as the growing age of life expectancy which had risen from about 47 in 1900 to around 60 in 1930. People were living longer and needed economic support in order to survive. During the Great Depression, people had lost their jobs, what little income they had saved up, and were desperate to support their loved ones. Roosevelt was almost obligated to create a program like this in order to prevent an even worse scenario where more and more elderly people went into poverty and dried up their sons and daughters incomes, leading to a deeper recession. Although this system greatly helped back in the 1930s, the question is whether it is helping today. Statistics from Thomas Fiery, the editor of the Cato Institute for writing on the economy, states that the baby boomer generation only paid about 6.5% of their income while our generation is paying about 12.6%. He States “They’ve paid less of their earnings into Social Security than we have, yet they’ll receive more in benefits than we will and we’ll pick up the tab”. The Millennial generation is in a bad position being in such a poor economy where it is hard to find jobs and having to pay into a program we will likely not get. With these conditions, it makes it hard for people to save for retirement. Unless reforms are made to improve the system, we may face an even greater depression when the Social Security Trust Funds run dry. The Social Security Board of Trustees even state that the funds will run out in 2037 based on the current system laws. There are not enough people working to support the system where more and more people are requesting benefits. It is essential for our generation to budget and save as much as possible in order to support ourselves later on. With the economy and the Social Security system the way it is now, we may have nothing to fall back on.
    http://spectator.org/articles/35653/millennial-perspective
    https://www.huntingtonchamber.com/news/blog/231-will-social-security-be-around-when-i-retire
    http://query.nytimes.com/gst/fullpage.html?res=9b0cefde1e38f930a15752c0a9639c8b63

  32. Even though adults save more than younger “Millennials,” many of them find themselves still not having enough money to retire with. People don’t want to have to work until they’re 80, but would rather collect Social Security from the government. Therefore, it would be in a Millennial’s best interest to start saving as soon as possible, but the chances of that happening before they reach adulthood is slim. However, there may be another option: delaying your benefits. Consider the following example. One person starts collecting their Social Security at the starting age of 62 and another person starts collecting it at age 70. According to CBS News, by the time both of these people reach 85, the person who started collecting Social Security at 70 could have up to $129,600 more than the person who started at 62. Also, that amount could be doubled if your spouse waits to collect their Social Security as well. Although the downside to delaying your benefits is working more years, the outcome may be greater than the process. The best option is for “Millennials” to start saving as soon as possible, but if that’s not feasible, working just a few more years and delaying your retirement benefits might be the way to go.

    http://www.cbsnews.com/news/boost-your-social-security-payout-by-100000-08-04-2013/

  33. Generation Y proves to be much more confident in the economy and their savings than past generations have been. They have confidence in their investments and trust their money to grow much more today than people from past generations. They are smarter about saving and have better ideas of how to do so. They handle their finances much better and have a enhanced understanding of what all their money will actually be going towards, and how much they should be saving each week, month and year. (Fidelity website). Although people of both generations have an equal uncertain understanding of what will occur in the future, Generation Y is better prepared and handles their finances in a more responsible way as they have seen what has happened in the past and choose to take it upon themselves to manage their own savings and money to prepare for their future retirement. “The future is uncertain in many respects, and based on new information, projections of the financial status of the Social Security program vary somewhat over time” (U.S. Social Security Administration website). This program is here to aid the elderly who are no longer able to work and need money to still live comfortably and not in poverty. However it should not be the responsibility of future generations to entirely fund the program to past generations who were not as responsible with their savings and did not plan for retirement properly.
    http://www.ssa.gov/policy/docs/ssb/v70n3/v70n3p111.html
    http://www.fidelity.com/inside-fidelity/individual-investing/fidelity-research-finds-gen-y

  34. Social security was originally passed into law following the great depression in 1935 when the economy was just beginning to recover from the worst crash in our country’s history and people were looking to the government for help. It should come as no surprise that this bill passed due to the fact that the Government during this time period was open to any means of propping up the economy as shown by the “New Deal” introduced by FDR. The purpose of social security was to provide some form of stability to the retired and working populations after the horrors of the great depression. Prior to the introduction of social security most of the working population either worked until they died or relied upon family members for support, because company pensions and retirement plans were almost non-existent; in fact only 5% of the retired population received pension benefits in 1932 (ssa.gov/history).

    In recent years, social security has become more of a burden than benefit to the millennial generation due to increase in baby boomer retirement. According to a survey conducted by the Pew Research Center only 6% of the millennial generation thinks that we will receive the same benefits that they are paying out (WashingtonTimes). Additionally, the current system forces the millennial generation to start saving earlier for retirement even when they are dealing with increased student debt, higher rates of unemployment, and an unstable economy. According to Laurence Kotlikoff an economist at the University of Boston, the current national debt should be 37 trillion if it accounted for unpaid social security payments due to the baby boomer generation. This reinforces the point that the millennial generation must plan to fund their own retirement and live on a tight budget with regard to housing and how they live because the current social security system will not hold up to support their generation in retirement (WashingtonTimes/Kotlikoff.)

    The cost of social security is simply not worth the tradeoff because the Millennials are shouldering the burden of an entire generation’s retirement while their own benefits are shrinking. This is due to the fact that social security revenue continually falls below the amount that the program pays out, meaning that the coffers are going to run out eventually (washingtonpost.) Social security is a program that needs to be redesigned in order for it to remain relevant to the retirement plans of future generations.

    http://www.ssa.gov/history/hfaq.html

    http://www.washingtontimes.com/news/2014/mar/28/ghei-the-sucker-generation/

    http://www.washingtonpost.com/business/millennials-money-misfortune/2014/03/13/c6659b1e-aa17-11e3-9e82-8064fcd31b5b_story.html

  35. Social Security, originally intended as a supplement for the elderly in poverty when created during the Great Depression, has become a tough topic in recent years with the increased life expectancy of the elderly, and thus the increased costs of providing for these elderly who receive benefits from this program. The program itself is funded by income taxes of those currently employed, but with the decreasing workforce, the current generation of “millennials” faces the question of if they really believe that this program will still be around by the time they retire, and even if it is, how much will they have to supplement these benefits in order to actually live comfortably during their retirement?

    While the future of the Social Security system is unknown for these millennials, over 70 percent of these millennials expect to be the ones footing the bill for their own retirements, as the current Social Security system does not in fact provide nearly enough to live off of in the same, or even similar, manner to their salaries they could earn if they did not stop working (Collinson). While the millennials seem to be naïvely optimistic about their ability to save for their retirement themselves, an amount that is estimated to be about eight times as much as their final working salary, there does seem to be an increase in the ambitions for saving from those with pessimistic outlooks on the future of the Social Security System (Fidelity.com, Collinson). However, in order for these millennials to fare well in their retirement savings, they must first look more closely at their options when starting to save, in order to ensure that they do not spend too much of their savings on fees charged by their retirement funds, or choose a job with limited retirement benefits just because of a larger salary (Associated Press “A Guide Through the Complexities of 401(k) fees,” Collinson). Yes looking at the larger picture of future retirement when deciding about where to live, which job to choose, and how to live may limit some options for millennials when deciding how to live their lives, but it will grant them more freedoms and alternatives for their living standards down the road when they do eventually retire, since the Social Security system will not be able to provide enough to ensure this for them.

    https://www.manilla.com/blog/millennials-whats-your-40-year-financial-forecast/
    http://www.fidelity.com/inside-fidelity/individual-investing/fidelity-research-finds-gen-y
    http://www.washingtonpost.com/business/a-guide-through-the-complexities-of-401k-fees/2014/04/12/3b828468-c249-11e3-9ee7-02c1e10a03f0_story.html

  36. By 2042, Social Security Trustees have suggested that Social Security will be bankrupt leading to major deficits which will result in large tax hikes, large spending cuts or borrowing from the public. Announced this week, The Social Security Administration will cease to collect taxpayers’ debt that are more than ten years old to the government. The issue of debt accrued from Social Security brings another side to this debate. These debts date back to the middle of the past century to the Social Security Commissioner, Carolyn Colvin, wants to halt any more referral in an attempt to recover debts that have accumulated for over ten years. First, the statute of limitations on debts to the government, that are more than ten years old, are lifted. Then, the Treasury Department now allows the government to intercept taxpayers because they believe this is the way to refund the government for lost refunds, collecting two billion refunds this year and seventy-five million on debts older than ten years. The collection of newly discovered old debts led to families having checks seized by the government because of accumulated debts under the Social Security number of deceased members of the family. For instance, the government seized Mary Grice’s checks because of a $2,996 debt under her father’s Social Security number from his death in 1960. Under the 1939 Social Security Amendments, monthly benefits are payable to children of insured workers that have passed, become disabled or retired. Current government actions are violating this causing Social Security officials to send a message stating their reexamination of responsibility under the current law. In this instance, the children of the Millennial generation were not reliant on the Social Security System but were completely shocked when they were punished for previous debt and when their current funds were taken from them. The Millennial generation already has lost faith in the system as well, with 51% believing that there will not be money for them in the Social Security system by their retirement and 39% believe they will already get reduced benefits. The principle of paying today to prepare for old age is a rightful and well-thought plan, and worth the trade-off and cost-benefit opportunity of higher taxes and a strenuous younger age, but the reality is that the hard work put in early is not being rewarded with the Social Security benefits promised.
    http://www.washingtonpost.com/politics/social-security-stops-trying-to-collect-on-old-taxpayer-debts/2014/fami04/14/9355c58e-c40f-11e3-bcec-b71ee10e9bc3_story.html
    http://www.ssa.gov/policy/docs/ssb/v71n1/v71n1p1.html
    http://www.concordcoalition.org/publications/facing-facts/2004/0413/social-security-reform-facing-real-trade-offs
    http://thehealthcareblog.com/blog/2014/03/18/what-do-millennials-want-from-the-healthcare-system/

  37. Social Security was put into law on August 14, 1935 with the goal of being a safety net for older Americans in the post Great Depression era. One could argue that a fundamental flaw was how the Social Security law was initially enacted. The Social Security law as designed had the younger, working generation, pay for the benefits of the older, non-working generation. Had the law been implemented where the younger working generation paid into the system to fund their “own” retirement, similar to how the current 401k/IRA plans do, Social Security would not be faced with the current solvency issue. Of course the downside to this funding model would have been no benefits for that first generation of retired Americans in 1935.

    Had the latter approach been pursued, the Social Security system would be in a better position to deal with a major contributor to its current solvency issue; the current mismatch in the populations size of the Millennial (payer) vs. the Baby Boomers (payee) generations. Exacerbating the mismatch in the size of the payer vs. payee generations is the increasing length of the Baby Boomer life span. The longer life expectancy of the Baby Boomers, which is approaching 80 years of age as compared with a life expectancy of 57 at the turn of the century, has provided the last 2 or 3 generations with the opportunity for a retirement. Prior to this, a person’s retirement years consisted of living only a few years once they could no longer work and they managed financially by living off their savings, dependent on family or more recently a lucky few had a company provided pension plan.
    Several key changes that Social Security system must make include:
    1. Increase retirement age – tied to life expectancy of a given generation
    2. Resolve the current funding mismatch by securing funds from other sources or means test the Baby Boomer generation
    3. Work to accelerate the shift in public opinion to view Social Security benefits as a safety net or as a foundation of a person’s retirement income. To be supplemented by other retirement plans (401k/IRA) of the individuals choosing

    It is my opinion that the Social Security system should be maintained, although currently faced with several challenges to its funding model, on balance the system has been successful in providing a safety net for generations of Senior Citizens and once these solvency issues are resolved, this program will provide the foundation of benefits to the Millennial generation as it has for all previous generations dating back to its inception in 1935.

    http://www.wttw.com/main.taf?p=46,7,4,2

    http://www.ssa.gov/history/hfaq.html

  38. Social Security was established in August of 1935 by President Roosevelt right after the economy was coming out of the trough of the Great Depression. It’s purpose was to keep the the retired people and those who were physically unable work out of poverty. These people who had spent all their savings during the Great Depression would be given a lump sum of money each month. This legislation was extremely helpful when it first started however, since the baby boomers have started retiring there have been more and more social security taxes on paychecks each year. I believe the social security costs outweigh its benefits. The increased number of retirees in the baby boomer generation is now making generation Y pay more in social security taxes. This increase in tax heavily restrains our generation to save for retirement. “Future generations are going to do worse because either they are going to get fewer benefits or they are going to pay higher taxes,” said Eugene Steuerle, a former Treasury official who has studied the issue as a fellow at the Urban Institute. With people living longer which means more taxes to support those people, how can we, Mellinnials, continue give our hard earned money to people we don’t even know. This cuts our potential for saving in the long run.

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