Social Security Program
According to DeWitt (2010), the Social Security Program is accessible to every family, in one way or another, having an impact on the life of every American citizen. It is regarded as a basis for economic security for retirees, disabled individuals, along with dependants of the retired, disabled or deceased workers. According to DeWitt (2010), approximately 169 million American citizens remit Social security taxes while receiving benefits on a monthly basis. Additionally, 1 in every four families acquires income from the plan.
In this case, it is regarded as a pay-as-you-go program, meaning the staff members remit a specified amount into the program. In return, money is remitted as a monthly revenue to the program’s beneficiaries. According to Coile and Levine (2011), the average monthly stipend was $1,391 each month for retired workers, widows above the age of 60 obtained $1,307, and workers with a disability received $1,172. Moreover, A widowed spouse and two kids are entitled to $2,264 every month and $2,278 for a disabled worker’s spouse.
As soon as the Civil War ended, a majority of the American citizens were either survivor, disabled, or widowed. The figures far outweighed that any preceding warfare experienced on American soil. This resulted in a realization that the nation greatly requires a pension program. However, the proposal faced opposition from a section of the officials due to various reasons. Foremost, the opposition believed it would lead to a reduction in the labor force. However, program supporters argued that the retirement of older working personnel might generate space for young men, which was a significant concern during the great depression. Despite the excellent outcomes attributed to the proposal, many citizens still believed it was a decree of socialism.
In June 1934, President Roosevelt instituted the Committee on Economic Security and was given the mandate of drafting an economic security proposal. Led by the first woman to hold a cabinet position in the United States, Labor Secretary Frances Perkins, the committee designed the Social security law intending to provide financial safety to American citizens. The proposal comprised an old-age annuity framework, redundancy cover financed by proprietors, financial aid for widows and disabled persons, and health cover for individuals with financial constraints. On August 14th, the President enacted the Social Security Act after bill was unanimously passed by Congress.
Nonetheless, the act did not provide a lasting solution to the emerging challenges. According to Milligan and Wise (2011), a majority of women and other minority groups were excluded continuously from receiving benefits of the cover. It is also denied individuals who worked on an intermittent basis, principally dominated by women and minority populations. The act also excluded a section of job classifications-for instance, personnel in the agricultural sector, domestic service, government members of staff, teachers, nurses, hospital personnel, and social workers. Numerous amendments were enacted in the Social Security Act to respond to the economic worries and rising concerns arising from the alteration in gender roles and the position of the marginal groups. The social security act’s modifications have established a balance between the promotion of fairness and attempts to offer enough financial security to every American citizen.
Currently, the program continues to be a critical aspect for the planning of retirement benefits for every eligible American citizen, particularly considering the low saving rates. The Social Security Administration offers over $700 billion every year to approximately 50 million orphaned kids and disabled individuals. The reimbursements financed through the taxes remitted by companies and personnel. According to Milligan and Wise (2011), the program’s annual net cost was estimated at $1 trillion. The figure is projected to be around 28% of the total federal spending by 2024. Members of staff make a significant payment to the program and Medicare through the Federal Insurance Contributions Act or the Self-Employed Contribution Act. The deductions of taxes are made from the workers’ payments, and remission of benefits is done every month to eligible persons.
According to Milligan and Wise (2011), the current tax rates for the program stand at 6.2% for the employer and 6.2% for the employee. The actual rates for the Medicare program comprise of 1.45% for both the employer and the employees. Additionally, extra taxes are applicable to a person’s Medicare earnings that surpass a specific amount founded on the filing status of a taxpayer. Establishments are accountable for reserving 0.9% extra Medicare Income tax on a person’s incomes remunerated in surplus of $200,000 every year, devoid of considerations of filing status. A proprietor is compelled to commence the withholding of the extra Medicare taxes in the payment duration if an employee receives in surplus of $200,000. The business continues withholding in every payment period until the end of the calendar year.
Calculation of Benefits
Payments made through the social security program are computed by utilizing 35 maximum earning duration of an individual’s career and are modified if inflation is experienced. If individuals work for more than 35 years, the lowest-earning years are not integrated into the calculations, resulting in higher payments. For instance, for an individual to become entitled to social security payments, the beneficial amount is computed by multiplication of $895 of the regular indexed monthly salaries by 90%. The remaining income is increased by 32% to $5,397 and incomes over $5,397 by 15% (Milligan & Wise, 2011). Individuals that do not work for 35 years have zeros averaged into the calculation and receive reduced expenses. An individual’s age plays a significant role in determining payment amounts. An individual’s benefits are reduced if claims are made before attaining the retirement period; at the age of 65.
The benefits of social security stretch further than the only retirement. If an individual meets the work requirements despite not attaining the required retirement age, one is eligible to receive reimbursements equivalent to the full retirement benefits. A surviving spouse or disabled kids are also entitled to full benefits founded on the income record. According to Coile & Milligan (2016), the existing laws legalize same-sex spouses’ eligibility to gain access to the benefits, if the state of residence recognizes the validity of the marriage. Therefore, this means that if a specific state recognizes same-sex partnerships, they may also recognize partnerships from other states.
The President states that the well-being of the citizens measures the government’s failure or success. The nation’s social security program has offered many American citizens the opportunity to access financial aid in times of need and, therefore, consider social security funding the primary source of income. Despite the pitfalls, the program is considered one of the most significant aspects as it offers a retirement lifeline. This allows the citizens to retire without having to depend on other members of the family comfortably. The program remains to be the most effective and productive since its conception.
Coile, C. C., & Levine, P. B. (2011). Recessions, retirement, and social security. American Economic Review, 101(3), 23-28.
Coile, C. C., & Milligan, K. (2016). Social security programs and retirement around the world: disability insurance programs and retirement. University of Chicago Press.
DeWitt, L. (2010). The development of social security in America. Soc. Sec. Bull., 70, 1.
Milligan, K., & Wise, D. A. (2011). Social Security Programs and Retirement Around the World: Historical Trends in Mortality and Health, Employment, Disability Insurance Participation and Reforms-Introduction and Summary. NBER Working Paper, (16719).
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