1. Is Social Security really in trouble?
  2. What's wrong with the current Social Security system?
  3. How do we fix Social Security?
  4. What are personal retirement accounts?
  5. What are the benefits of personal retirement accounts?
  6. Are there other ways to fix Social Security?
  7. What if I already receive Social Security benefits? Will my benefits be cut?
  8. What if I don't know how to invest wisely?
  9. What if there's a sudden stock market swing or another economic recession?
  10. Could the money in my personal retirement account be passed on to my children or beneficiaries?

1.  Is Social Security really in trouble?

Yes.  Within the next 12 years, the Social Security system will begin to fail as benefits paid to retirees exceed the Social Security taxes that workers pay into the system.  In order to ensure that today's workers are able to enjoy the retirement benefits that they deserve, we need to take steps now to modernize the Social Security program.
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2.  What's wrong with the current Social Security system?

You probably know that most of the money that is taken out of your paycheck for Social Security isn't put away for you to use when you retire - it's used to provide immediate benefits to today's retirees.  But more Americans are retiring every year, and they're living longer lives.

For example, in 1950, there were about 16 workers paying Social Security taxes for every one retiree who drew benefits from the system.  Today there are only about three workers for every retiree.  This means that there aren't enough workers to support the rising number of retirees.

Within the next 12 years, Social Security will begin to pay out more money in retirement benefits than it takes in in payroll taxes and the system will no longer be able to sustain America's retirees.  In order to maintain the current system, we would have to either cut retirement benefits by nearly one-third or raise the Social Security tax by approximately 50 percent.
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3.  How do we fix Social Security?

Generations Together supports modernizing Social Security through personal retirement accounts.  We suggest that American workers be allowed to take personal control of their retirement security by investing a portion of their Social Security payroll taxes in bonds, stocks, funds, or other assets.
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4.  What are personal retirement accounts?

Personal retirement accounts are individual accounts that allow workers to invest a portion of their Social Security payroll taxes in bonds, stocks, funds, and other assets. These accounts are owned by the individual investor, not by the government.
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5.  What are the benefits of personal retirement accounts?

Personal retirement accounts offer us a way to strengthen Social Security by simultaneously helping young workers prepare for retirement and ensuring that current retiree benefits are maintained.

One of the specific benefits of personal retirement accounts is personal ownership.  All of the funds in your personal retirement account will belong to you, not the government.  Under the Social Security plan, the government has no legal obligation to pay your Social Security benefits, and there is no guarantee that your benefits will not be cut.

Personal retirement accounts can also give workers increased returns on their investments, even if the stock market performs poorly.  Under the Social Security program, workers receive a 2 percent rate of return on the taxes they pay into the system.  However, long-term personal investments average an 8 percent increase annually.
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6.  Are there other ways to fix Social Security?

According to the Social Security Administration, there are four options for Social Security:

  • Raising the Social Security tax on working Americans to build the volume of funds needed to support retirees' benefits;
  • Cutting benefits for retirees to balance out the amount of money received in workers' payroll taxes;
  • Using general tax revenues to supplement the Social Security tax (but reducing the money available to support other, equally important programs);
  • Establishing personal retirement accounts or directly investing Social Security trust funds, which would neither raise taxes for workers nor cut benefits for retirees.
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7.  What if I already receive Social Security benefits?  Will my benefits be cut?

Absolutely not.  Current retirees will still receive their scheduled Social Security benefits.  In fact, the Social Security Administration plans to continue increasing benefits each year to adjust for inflation.
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8.  What if I don't know how to invest wisely?

You won't have to manage your personal retirement account on your own!  You would have help from an experienced account manager at an approved financial firm, who can help you make sensible investments and grow your personal retirement account.  At first, you would be restricted to low-risk investments, and you would not be allowed to put all of your money into a single stock.  This would help make sure that swings in the stock market wouldn't wipe out your personal retirement account.
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9.  What if there's a sudden stock market swing or another economic recession?

A study by William Shipman of State Street Global Advisors, a professional asset management firm, showed that workers would fare better with personal retirement accounts than with Social Security, in spite of stock market swings.  Shipman's calculations confirmed that 99 percent of workers who invest all of their Social Security payroll taxes in the U.S. stock market would receive better benefits with personal investment than they would through Social Security, even if the stock market were to drop as drastically as it did on its worst day, month, or quarter in history.
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10.  Could the money in my personal retirement account be passed on to my children or beneficiaries?

Yes.  The money in your personal retirement account belongs to you.  The "nest egg" you build in this account would become part of your estate and could be passed on to your heirs or to other designated beneficiaries.

In contrast, under the current system, you lose all of your benefits when you die, and no more than $255 can be passed on to your dependents.  Only your spouse may continue to receive a survivor benefit. And no matter how much you pay in taxes throughout your life, your benefits are lost completely when you and your spouse pass away.
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