The Social Security Trustees report continues to report that Social Security is headed for insolvency sooner that previously expected. They have projected that Social Security will not be able to pay full benefits by the year 2040, and will begin to run deficits by 2017, a year sooner than last years projection.

Social Security began in 1937 as a strictly supplemental retirement income. The payroll tax was 2% of a workers income up to a maximum of $3,000.00. This worked really well in 1937 when there were 45 workers for every one retiree and a lot of retirees didn’t live much past 65.

But over the years Congress began to add benefits to the Social Security Program, they added spousal benefits, survivor benefits for children, supplemental security income, and disability benefits.

As Social Security benefits grew over the years as increased benefits were added, a problem arose; people started living longer and people started having fewer children. The ratio of workers to retirees went from 45 to 1 in 1937 to today’s 3 to 1 ratio and is projected to be only 2 to 1 by 2017.

Congress in order to meet increasing demands on Social Security has raised payroll taxes 20 times since 1937 from 2% in 1937 to 12.4 % today. They have raised the retirement age from 65 to 67. They began taxing Social Security benefits in 1983.

By 2008 the baby boom generation will begin to retire and by 2035 we will have 78 million retirees receiving benefits and these 78 million retirees are expected to live longer and will put additional stress on Social Security.

The Social Security Administration has reported that the projected 2 to 1 ratio of workers to retirees will not be enough to fund full benefits, because of this the Social Security Administration has reported that without any other reforms; Social Security benefits will have to be reduced by 25% or payroll taxes would have to be raised from the current 12.4% to approximately 18%, or a combination of both.

The Social Security trust fund contains the surplus revenue from Social Security payroll taxes. Social Security has been running surplus revenue from payroll taxes and is projected to run surpluses until 2017 when the system will begin to run deficits. The Social Security trust fund now contains 1.7 trillion dollars. OR DOES IT! Actually Congress has raided the Trust Fund and taken 1.7 trillion dollars over the years to use for other budget items.

In 2017, when Social Security begins to run deficits they will have to pay back that money in order to keep Social Security solvent until 2040 when at that point even if Congress finds a way to pay back the trust fund money, Social Security will not be able to pay full benefits and raising the retirement age, increasing payroll taxes, cutting benefits means you pay more and get less.

The Federal Government has tried to fix Social Security over the years by raising payroll taxes, cutting benefits, and raising the retirement age and still Social Security is still headed for bankruptcy. Both Social Security and Medicare together is projected to have a 70 trillion unfunded liability over the long term.

One day soon our generation will have passed and if we do nothing today, future generations will be stuck with a failing government retirement system. Those future generations will ask of us, why didn’t you do something about it while you could? The questions we must ask ourselves, are we going to allow Congress to continue to stick their heads in the sand and ignore the problem, refuse to have an open discussion about our options or are they going face reality and say we care about what our country will look like in 30 years, we care what will happen to our children, grandchildren and great grandchildren long after we are gone? Are we going to continue down a road of more government dependency or we are going to allow Americans to have more control of their lives, a chance of ownership and the pride of self-reliance and independence that our founding fathers envisioned over 225 years ago?