Social Security is a public retirement pensions system administered by the federal government, and covering most US employees, giving them an average of $8000 for a single person and $14,000 for a couple, providing them with a base income during retirement (Moody, 2002, 215). It was never intended as a sole income source, and most people have other retirement accounts and investments to supplement this income. The problem ahead now is that as the baby boomer generation nears retirement age, and the federal government keeps borrowing from the social security fund to pay for other programs, that there will not be sufficient funds to keep social security payments flowing to new generations of retirees. As it is, the current payments do not even come near the national poverty level income, so those who do not have other sources of support, or who saw their savings and retirement accounts evaporate in the stock market crash of recent years, will be in dire need of some sort of financial assistance.
Currently, Social Security is funded by a payroll tax which is regressive, with everyone paying 7.65 percent, but only on the first $80,000 of earnings, meaning even people earning millions are only paying the same as someone earning $80,000 (Moody, 2002, 216). This places a heavy burden on the poor for supporting Social Security. The distributions go down as earnings rise, but people with higher incomes still receive higher benefits. Another problem is what is known as the dependency ratio: the way Social Security is set up, younger generations paying into the fund are paying for the disbursements to older generations, which works fine if population ratios are constant. But in the case of the baby boomers, for example, there will be a tremendous swell in the retired population as they age, who will be drawing Social Security from contributions of the Gen-Xers, who had a much slower birth rate, so there will be fewer people paying in...