Social Security can still be saved, not through investing on Wall Street, but by ridding the income cap which people pay to the system based on the income they earn.
To fund Social Security, a worker pays 12.4 percent of their paycheck to the government or a maximum of $90,000 on the first $725,000 dollars of income.
According to Michael Hudson’s “The $4.7 Trillion Pyramid” privatizing Social Security will not make the system solvent. Employers are not funding their pensions and corporate failures have left many people without pensions.
President Bush’s private accounts proposal for Social Security will make the system insolvent because it calls for a $4.7 trillion transfer of funds from the trust fund to the stock market. As it is estimated by the Pension Benefit Guarantee Corporation (PBGC), the traditional benefits (defined benefit plans) are already under-funded by a total of $450 billion.
Should private accounts become law, most women and African Americans will be adversely affected because the FICA taxes they pay will be diverted from the Social Security trust fund to private accounts.
Women will be adversely impacted because 20 percent of women versus 47 percent of men over age 65 receive a pension. The average annual pension income for women is $2,682 compared to $5,731 for men. Poverty in this country is also a major issue as many Americans have little, if any, savings in addition to Social Security.
According to an American Association of University Women article, 25 percent of women who are single because they are widowed, divorced, separated, or never married, versus 20 percent for single men, count on Social Security as their only source of income.
The National Committee to Preserve Social Security and Medicare states that African Americans will be adversely affected by an insolvent Social Security trust fund because 40 percent rely on Social Security as their only source of income due to lower pension coverage and lower earnings.
It is also estimated that without Social Security, the poverty rate for older African Americans would increase from 22 to 57 percent.
There is a much simpler way to ensure that the Social Security trust fund is solvent for your retirement in the future and that is to remove the $90,000 cap.
Instead of capping FICA tax at $90,000 on the first $725,000 of income, individuals would continue to pay regardless of whether their income was $726,000 or $200 million. According to a San Fransisco Chonicle article this solution will ensure Social Security has a surplus until at least 2090.
To ensure that our leaders do the right thing, contact your federal representatives by phone or mail and let them know your stance before it is too late.
