ACCOUNTING FOR THE CAPACITY OF SOCIAL SECURITY TO MEET PAYMENTS
Recent posts of
Mary Emma
(http://www.homebiznotes.com/social-security-the-home-business-ownerwhat-should-we-do/ and http://www.homebiznotes.com/social-security-follow-up/)
and Bob
addressed the issue:
“At current rates, Social Security payouts will exceed payments made into the system within the next ten years. What should we do about Social Security?”
The ensuing debate / comments centered on the concept of social security itself, whether it still serves its original purpose, or be scrapped altogether and be privatized.
I thought that, while it is still in force, we should find out why payouts will overtake payments and presented 3 possible causes:
1 With the improvements in health care and the discoveries in medicine, people are living longer so payouts are stretching farther into the future.
2 Couples are marrying later and having less children, thus –less earners. The payments side of Social Security is contracting.
3 The investment portfolio of the Social Security System is not earning enough.
However, Bob thought that these problems “are in and of themselves reasons to discontinue it.”
I introduced the idea of family care supplanting and/or supplementing Social Security which Mary Emma & Bob thought might be workable. But Miki of Leadership Turn pointed out that ”the idea of family care manages to ignore that there are millions, myself included, who have no family from which to draw support.”
However, while it exists, it is important to consider its health.
Continuing the tack on payouts exceeding payments and the Social Security System’s future inability to service fully its commitments to its members, I see a critical area which should be investigated: the actuarial bases for the System.
Clearly, the actuarial bases (e.g., mortality tables, yield rates, etc) have changed radically (longer life spans, less earners coming into the System). The weak dollar decreases the earnings rate of the Social Security investment fund and makes everything more expensive for the
Image from Microsoft Clipart
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4 opinions for ACCOUNTING FOR THE CAPACITY OF SOCIAL SECURITY TO MEET PAYMENTS
Bob Turek
Jan 25, 2008 at 1:27 pm
Ren- this is interesting. Do you know if actuarial issues were considered when the social security system was established? i.e., I wonder how they came up with the ages and payout schemes?
Anes S
Jan 26, 2008 at 3:12 pm
I thinkwe should paying less on social security as we also paying for the insurance to cover the health. What we need is a pension scheme or an employer fund.
Mary Emma Allen
Jan 28, 2008 at 8:59 am
Ren, good follow-up on our Odd Blog Couple posts about Social Security. You expanded upon this aspect of the topic very well and give meaningful insight into it.
More Enlightenment on Social Security for the Home Business Owner
Feb 1, 2008 at 3:24 am
[…] possibility of it running out in the next few years, Ren Garcia, at Accounting Solver discusses, Accounting for the Capacity of Social Security to Meet Payments. Perhaps we should say, the “incapacity” to meet […]
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