Social Security Tax System

.. sted in 2034, Americans must invest elsewhere, in order to secure a financial stable retirement. One way to secure a financial stable retirement at a low risk investment is by securing physical property. By investing in physical property, an investor would have physical equity instead of electronic. This physical equity would create a low risk investment, even if the roof caved in on Wall Street, the investor would have something physical to lay claim too. However, a draw back to securing physical property is personal time; the investor either has to hire a property consultant/manager or become one.

Another draw back to securing physical property is the fact that property markets are just as diversified as Wall Street it-self. Property markets fluctuate and change based on the economy and demographics, and not everybody lives in Holly Wood or San Francisco. For example, in Southern California, a family named the Anderson’s moved to a small rural city (1960) called Simi Valley, located 25 miles N/W of Los Angeles, paying only $13,000.00 for a small 3 bedroom home. Later, in 1988 the Anderson’s decided to move North and sold their home for $179,000.00. They were really lucky, because shortly later, their old home peeked at $190,000.00 before falling to $150,000.00 average. However, the Anderson’s walked away with a gross of $166,000.00 or a 1,376% increase.

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Another way to invest in low risk investment is by purchasing Government Bonds. Government Bonds are backed (Insured) by the Federal Government and are guaranteed a set % for the life of the Bond, which normal yields a 3% gross. High Risk Investment As it stands now, there are basically three ways to restore the system’s long-term solvency: raise taxes, cut benefits or earn a higher return on the system’s trust funds. Democrats generally do not want to cut benefits, while Republicans do not want to raise taxes. Therefore, the solution under serious consideration by policy-makers is to invest part or all of the Social Security trust fund in something with a higher annual yield than it is currently earning.

Another way to classify the current reform proposals is to think of them as being grouped into one of two general categories: minor, if any changes; and plans that propose more drastic changes. The latter would either include means-testing of benefits or investing much of the funds that now enter the pay-as-you-go system through taxes into individual interest earning 401(k) retirement plans and individual retirement accounts. Privatization advocates of argue that redirecting Social Security funds into private accounts would generate revenue for the system without having to raise taxes. They estimate that workers could earn returns up to 7 percent on their Social Security contribution in comparison to the less than 3 percent earned currently by Social Security funds invested in U.S. Treasury bonds.

Opponents of privatization counter that the Treasury-bond system is stable, unlike the volatile stock market, which, they argue, could tank at any time. Many also oppose privatization on the grounds that placing money in private accounts would reduce the funds available for guaranteed monthly payment, on which many low-wage workers depend. Privatization opponents also point out the high transition costs associated with moving toward a privatized system, which would have to be raised to support existing payments while current payments are funneled into private accounts. President Clinton has promised that much of his 1999 agenda will be devoted to a national dialogue on the future of the Social Security system and has asked all Americans support his plan to save it. In his 1999 State of the Union address, President Clinton put forth a proposal that calls for the transfer of 62 percent of the projected budget surpluses over the next 15 years — more than $2.7 trillion — to the Social Security system. The government would invest a portion of the transferred surpluses in the private sector to achieve higher returns for Social Security.

The president says this course of action will keep Social Security solvent until 2055. At the heart of his plan is a proposal to allocate 11 percent of surpluses to create” universal savings accounts.” These government-subsidized “USA accounts: would help individuals save for retirement. A portion of individual savings in the accounts would receive matching federal funds. In addition, Clinton says he is dedicated to working with Congress on a bipartisan plan that would shore up Social Security until 2075. These negotiations will involve controversial issues, whether to raise taxes, slash benefits or raise the retirement age. Some Republicans, most notably in the House, prefer that some of the surplus be returned to taxpayers in the form of tax cuts.

The taxpayers would then be free to invest this money as they choose, possibly in high-yield private savings accounts. But many lawmakers across the political spectrum say that cutting taxes would be tantamount to squandering the surplus. These lawmakers generally agree that the current budget surplus presents an historic opportunity to shore up the disintegrating Social Security system. Republicans have said that they are reserving H.R. 1 for legislation based on the president’s Social Security plan, when and if it is offered. This Special Report examines the present and future of the embattled Social Security system. Focusing first on the workings of the system, this report explores the leading reform and privatization proposals being discussed in Washington. The report also features an examination of how Social Security effects women and minorities, links to Social Security calculators, polls and feature events on retirement security and Social Security reform. Conclusion/Recommendations We feel that something must be done to the Social Security Tax System, especially as it stands now, to secure a bright and strong future.

We feel that the Keynesian approach, with a mixed investment base by each individual will satisfy its future. References Social Security. (1999). The Future of Social Security [Online]. Available: [1999, July]. Apfel, K.S.

(1998). President Clinton’s State of the Union [Online]. Available: of union press.html [1998, January 5]. Social Security at the Crossroads, Amy Steinhttp (Online). 60/Intro60.html Bibliography References Social Security. (1999).

The Future of Social Security [Online]. Available: [1999, July]. Apfel, K.S. (1998). President Clinton’s State of the Union [Online]. Available: of union press.html [1998, January 5].

Social Security at the Crossroads, Amy Steinhttp (Online). 60/Intro60.html.