SOCIAL SECURITY

Social Security

Social Security

Social Security is a program that encompasses approximately 98 percent of jobs and that currently provides monetary benefits to one in six Americans (Social Security Administration, 2005). Recipients of Social Security benefits include not just retirees and their spouses, but also disabled workers and the spouses and young children of deceased or disabled workers. In 2004, the Social Security programs for old age and survivors paid $415 billion in benefits to such individuals, who accounted for 47.7 million Americans. As of June 2005, the average monthly benefit for a retired worker was $946, and the average combined benefit for a worker and spouse was $1,578. Additionally, 194 million Americans were fully insured by Social Security in 2004 (Social Security Administration Board of Trustees, 2005).

To reach this present situation, Social Security has been expanded in a number of ways since its creation, though the basic nature of Social Security has remained the same throughout its history. The original Social Security Act of 1935 created retirement benefits for only the retired worker, who became eligible at age 65. In 1939, Congress passed amendments to extend benefits to spouses and minor children of retired workers, as well as to the widows and minor children of deceased workers (Robert L. Clark, et. al., 2004).

Disability insurance arrived in 1954, and in subsequent years, the disability program expanded to include the families of disabled workers. In 1972, Congress passed legislation to create annual cost-of-living adjustments for benefit levels. Prior to that time, benefit increases were subject to the whims of Congress and happened only intermittently (James H. Schulz, 2001).

Goals and Principles

The Social Security program in the United States combines a number of specific goals and principles. First, the program is compulsory for those in jobs covered by Social Security, which means most of the population. This ensures that everyone participates and will thus be entitled to a benefit at retirement, which helps to solve the problem that many people do not plan adequately for their financial needs after retirement (Wade Pfau, 2003).

Nonetheless, Social Security was never meant to be the only source of retirement income for the elderly, but rather a minimum floor of protection from poverty. In addition, Social Security benefits are based on incomes and all participants are entitled to a benefit, which helps to remove the stigma of welfare programs. Another principle of Social Security is that the program is completely self-financed through Social Security payroll taxes and does not receive any funding from other sources.

Though Congress maintains the right to raise or lower benefits at its discretion, benefit reduction is more difficult because of the psychological notion of ownership that people feel for their benefits. Another key goal of Social Security is income redistribution, and the program includes a strong redistribution component. While benefits grow with income, the benefit calculation formulas are such that the benefits for low-income workers constitute a much larger portion of their preretirement incomes than is available to higher-income ...