Social Security the safety net for American workers

We call Social Security a retirement program but it is more than that, it is a safety net for families, not just elders. It authorizes payment to those permanently and totally disabled regardless of age, and it provides a monthly income to children under the age of 18 who lose a parent, like in the case of 911, when a check from Social Security is issued before insurance companies begin settling a death benefit claim.

If your salary is $160,200 or less, you are one of those individuals who not only paid Social Security taxes on your entire salary, but chances are Social Security is going to be your main source of income when you retire. Sixty-six million retired workers receive Social Security. Cutting benefits to 66 million individuals, the equivalent of 20% of our population, will have catastrophic effects on the economy.

Much misinformation exists about Social Security; it is time that we check the facts.The first thing you need to understand is that once your salary reaches $160,200 the additional salary is excluded from payroll taxes. One possible solution to address the projected Social Security shortfall is to increase or remove the salary cap. This means that individuals earning $250,000 or $400,000 or $1 million-plus, pay payroll taxes on their entire salary, not just a portion of their salary. It is estimated that at least 6 to 7 percent of the population has salaries above $160,200. Increasing or removing the salary cap that exists now should be part of the discussion.The second thing we need to understand is that the Social Security retirement program is an entitlement program. An entitlement is a provision made in accordance with a legal framework of a society. It is based on concepts of individual rights, which means if you meet the program’s eligibility requirements, you are entitled to a monthly benefit. Currently, you need to earn at least 40 Social Security credits to qualify for benefits. Forty Social Security credits are the equivalent of 10 years of work. A minimum of 10 years of work and the highest 35 years of earnings determine your monthly benefit. Unless the Supreme Court decides to reject the entitlement provision tied to the Social Security Act, Congress will be required to pay for benefits when the Social Security Trust Fund runs out of money. So far Congress has found money to pay for a variety of wars and pet projects. Finding money to pay Social Security benefits to eligible recipients is their legal, moral, and ethical obligation. Part of the ongoing discussion should include making sure Congress reaffirms its obligation to the American worker and this should be part of the discussion.The third thing we need to understand is that the Social Security retirement payment is not part of the federal budget. It is funded first by American workers and employers who each contribute about 6.2% of the worker’s salary to the Trust Fund. Secondly, it is funded by the Social Security Trust Fund reserves, and thirdly, by the taxes of approximately 5% that beneficiaries pay on their Social Security benefits. It is the largest federal program, but it has not been part of the federal budget since its inception.The fourth thing we need to understand is that the federal government has been borrowing money from the Social Security Trust Fund to finance a variety of operations. Notice I said borrowing, not stolen, because there are accounting transactions documenting the money that has been borrowed from Social Security. These paper transactions within the Social Security Trust Fund require a future payment. As of last year, 2022, it is estimated that the federal government owes $2.7 trillion to the Social Security Trust Fund. Why are our politicians discussing cuts to the Social Security Program when they should be discussing ways to pay the $2.7 trillion they have taken out of the Trust Fund, putting in jeopardy the safety net of American workers? They should also be discussing ways to repay that debt before the Social Security Trust Fund runs out of money in 2034.The fifth thing that we need to understand is that members of Congress and other federal employees are covered by a separate pension or retirement program, the Civil Service Retirement System (CSRS), not the Social Security retirement program. If one of the problems we are facing is the ratio of workers contributing to the program to retirees taking money from the program one thing we should be discussing is moving members of Congress from the Civil Service Retirement System to the Social Security System. This way the ratio between workers and retirees can be reduced. Congress will be more interested in addressing the shortfall if they have something personally to lose.The sixth thing we need to understand is that a retirement program is based on a defined contribution or a defined benefit rule. A 401K is a defined contribution because what is identified is the money you contribute to your retirement account but not the money you will receive when you retire. If you happen to retire when the market is down all your contributions could disappear, and your retirement income may be reduced to 0. A defined benefit is different because you know the amount you will get when you retire. Social Security and traditional pension plans are defined benefits regardless of the fluctuations in the stock market. Since the early 2000s, the idea to invest money in the Social Security Trust Fund in the stock market has been suggested to the public. This will create a defined contribution retirement program with no guarantees the money we put in will be returned.Retirement is a three-legged stool, one leg represents your 401K investments, one leg is your savings, and the last leg is your safety net, your Social Security retirement income. For those workers who earn less than $160,200, we deserve assurances that every single dollar we pay in payroll taxes to the Social Security Trust Fund is protected by our elected officials.Dr. Gema G. Hernandez, D.P.A., is former secretary of the Florida Department of Elder Affairs, retired professor at Nova Southeastern University, adjunct professor at University of Maryland Global Campus and part-time resident and homeowner at Fort Myers Beach.

This article originally appeared on Fort Myers News-Press: Social Security the safety net for American workers