You become available for social security benefits after you have worked at least 10 years. By accumulating credits through specificed earnings amounts, the federal government takes taxes out of your income to fund payments that you receive later on when you are no longer working (62 years or older). Although you are provided support from these payments, the government has already began paying out more than it receives, and with a growing population and life expectancy, that trend is sure to continue.
Why is this happening?
As the baby-boomer generation moves into the retirment phase, the added amount of people receiving social security benefits has amounted to negative cash flow for the program.
Although the intended purpose of the program was to create stablility for elderly or disabled people, the increasing volume of eligible people is now adding to the federal government deficit by forcing them to borrow to satisy these financial promises.
What are some solutions?
In order to cover the deficit incurring from giving out more than taking in, the government has been funding the payments with the interest it makes on administering treasuries. However, since that tactic involves one branch of government funding the other, it doesn't help cover the already huge spending deficit.
While the government predicts having enough capital to fund social security payments until 2035, the reality is that changes in policy will come much sooner. In order to combat an accelerating negative cash flow, the government can either increase taxes or decrease payments. Since voters and legislatures are often resistant to tax increases, the probable result is a decrease in payments for future eligible candidates.
What steps can you take now?
Although you can vote for social secuity policies that will inevitably present themselves in the near future, you might be looking for a more direct way to approach this worsening issue. Saving up money is challenging, find out if you're ready to start financially planning for the future. Download this checklist to stay one step ahead!
If you have more questions related to Social Security and how it works, check out this informational link from CNN:
http://money.cnn.com/retirement/guide/SocialSecurity_basics.moneymag/index.htmiid=EL