National Perspective : THE BUDGET : Social Security and the Deficit

All money that flows into the Social Security Trust Fund is spent by the government each year. In 1994, for example, $377 billion was collected and $325 billion was spent on Social Security recipients. The remainder was used to buy Treasury bonds, which build up as surplus in the Trust Fund. The Treasury used proceeds from the bond sales to help finance government operations, thus reducing the amount of borrowing it needs to do from the public. As spending on recipients increases, the amount of money available to the Treasury for such purposes decreases. Many recipients want the Social Security system to be roped off from the rest of federal finances. Otherwise, they worry, Congress will be tempted to cut their benefits in order to shrink the overall deficit.

PAYING IN

Paychecks: Workers pay 6.2% of their salaries on the first $61,200 of earnings a year. Maximum payment of $3,794.40. Employers pay and equal amount. The self-employed pay double.

Interest: Interest from Treasury Bonds purchased with past surpluses.

Taxes: Benefits are taxed if the individual makes more that $25,000 or couple makes above $32,000

THE TRUST FUND

The account: The Social Security Trust Fund is the program’s cash box, through which all funds pass. Payroll taxes contribute 90% of the annual take, interest on previous surplus provides 8% and 2% comes from taxes on benefits.

TAKING OUT

PAYMENTS

Retirees: They get about 70% of all Social Security payments.

Survivors: Social Security pays survivor benefits to dependent children until age 18 and widowed spouses, about 15% of total payouts.

Disabled: Benefits to the disabled make up the remaining 15%.

THE DETAILS

$1,471: Amount average worker paid into the system in 1994

$1,199 per month: Maximum payment to someone retiring at age 65 this year.

141 million: Number of people paying into system.

43 million: Approximate number of people receiving benefits.

$44,000: Total paid by employer and typical wage earner who retired in 1994.

4.25 years: Time it takes typical retiree to receive amount put in.

62: Age at which you may currently begin receiving retirement benefits (but with 20% reduced rate for rest of life).

65: Age at which you may currently begin receiving full retirement benefits if you were born in 1937 or earlier.

Voices

Sen. Alan Simpson (R-Wyo.): “Let me put it bluntly. A vote to exempt Social Security in the balanced-budget amendment is a vote to kill the balanced-budget amendment.”

Sen. Harry Reid (D-Nev.): “I don’t think it can be balanced any more than Evel Knievel could jump those fountains at Caesar’s Palace, unless Social Security (money) is used.”

Tough Times Ahead

Because of baby boomer demographics, the Social Security fund currently takes in more than it pays out, even ringing up a surplus. But that will change as baby boomers reach retirement age. Current projections show the system going broke in about 2029.

Age for Receiving Full Benefits Is on the Rise Year of birth: Full retirement age 1937 or earlier: 65 1938: 65 and 2 months 1939: 65 and 4 months 1940: 65 and 6 months 1941: 65 and 8 months 1942: 65 and 10 months 1943-54: 66 1955: 66 and 2 months 1956: 66 and 4 months 1957: 66 and 6 months 1958: 66 and 8 months 1959: 66 and 10 months 1960 and later: 67 Source: Social Security Administration

Researched by D’JAMILA SALEM / Los Angeles Times