Why Social Security Is Still Important

Social Security has been with us for sixty plus years - it's hard to believe. The first Social Security check went out in the mail in 1940 even though President Roosevelt had signed the Social Security Act into law, five years earlier. Since that time, quite a few American seniors have been thankful to receive that monthly financial safety net as they enter their retirement years.

Originally, in the first version of the bill, Social Security benefits were to be paid solely to the principal worker. But, prior to the bill going live, additional benefits for the spouse and child dependents were included..

Quite a few folks erroneously think that the Social Security system is equivalent to an investment annuity, in which you send money to the government. They will then invest it and give you the resulting income in monthly payments for the rest of your life. In fact, however, the system is closer to a government welfare program. The collection of payroll taxes , which finances the Social Security program, is managed under the authorization of the Federal Insurance Contributions Act, better known as FICA. FICA is like the enforcement arm of the system. It ensures that every worker "contributes" his or her fair share to the government pool.

Each new generation of workers is responsible for taking care of the previous generation's retirees. The amount of money you eventually get back from the government has only a tenuous relationship to the amount of money that was deducted from your check over the years. Since it's inception, the system has collected from contributors and paid out over nine trillion dollars to recipients.

But the 1940 law did not simply stop with providing benefits to retirees. It also contained the first incarnations of the welfare and unemployment systems which are still very much in evidence today.

Today, with millions of people losing their jobs every month, relaxing retirement travel is only a dream. With our financial systems going into the toilet, and the housing crisis exploding around us - these safety nets are becoming more important than ever. Many retired women, especially, are just barely able to make ends meet with the help of Social Security. This is because, although gradually changing, women today are less likely than men to have additional sources of income. Partly due to working less years in the workforce because of child raising responsibilities. And partly because, even while in the work force, women typically are paid less than men.

But even families that don't necessarily need Social Security to survive are helped by it. In fact, according to independent studies, if the government were suddenly to get rid of Social Security, many retired families would experience a drop in their living standards of 70% or more.

Many people fear that the system cannot sustain itself. In fact, there have been times in the past when the amount of money paid to recipients exceeded the amount of money collected via FICA. In these cases, Trust bonds were sold to make up the shortfall. Because of circumstances like these, Congress has occasionally upped the percentage of gross income that FICA can collect from salaries. Even these modifications, however, as the population ages and simultaneously live longer, may not be enough to sustain the system without drastic changes to the system.

The Social Security program is the mosts vast government program in the country - comprising over one fifth of the federal budget. As some politicians look at cutting the size and expenses of government, this program has an inviting target on its back. To many people, however, the cost of losing this critical system could ultimately be a great deal more than the cost of running budget deficits.