Chairs Message
Social Security Reform
By Nancy L. Roach, CPA
The holidays are over, the new year is here and with that comes “Tax Season.” Some of us will not see our friends who have tax practices until after April 15. At this juncture we wish them good luck and we'll see you in the spring.
I feel as though I must “come clean” with all of you and admit that I am becoming that age where retirement is just looming on the horizon. I know that I am not alone when we look at the demographics of our membership. Due to this looming retirement, I'd like to bring to light an issue for you to think about seriously. This major issue is the reform of our Social Security system. As CPAs we are trusted advisors to many governmental agencies and policy makers. We must help them understand the magnitude of this problem, and how it can be reformed. We will be helping to protect not only the benefits for us, but for future generations as well.
Below are some facts about the system that I think you will find fascinating.
• The Social Security program now in place in the United States was established in 1935. The retirement age was set at 65 years. Most people didn't live that long and never collected any benefits. Today the life expectancy of men is 75 years and women is 80 years. In fact it is estimated that the amount of people age 65 or over will double in the next 30 years.
• Social Security pays the current benefits from the taxes collected from people now in the work force. Approximately 80 percent of the current collections cover the current disbursements and the remaining funds are deposited in the Social Security Trust Fund. My understanding is that these excess funds, treated as a liability, are used to fund other government programs and treasury bonds are issued for the liability.
• One very important factor affecting the current situation is that in the 1950s there were 16 workers for every person receiving benefits. Today there are about three workers for each beneficiary and it is estimated that in 25 years the ratio will be about two workers for each beneficiary.
• Currently Social Security, the largest government program comprises about 21 percent of all federal spending. (Medicare comprises another 19 percent.) By 2045, the two programs combined together will consume roughly half of all tax dollars collected. The trustees report that by 2042 the Social Security trust fund will be depleted.
• In a recent article in USA Today it was reported that over the next 75 years that Social Security would have an unfunded liability of about $12.7 trillion. To put that into perspective, our current national debt is $7 trillion.
Several State Societies are making assisting with this reform a high priority. In fact, thank you to the Texas Society of Certified Public Accountants for many of the facts listed above and starting this effort. They have written a very educational paper entitled SAFE, Securing America 's Future Economy, The Need for Reform of Social Security and Medicare which outlines the problem in simple to understand language. In response to the growing concern by the state societies, the AICPA has now made the reform of Social Security a priority. Reform of Social Sec urity is a non-partisan issue and we must as CPAs become informed and help to lead the effort to reform a situation that not only will affect us, but future generations to come.
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