Through the
early 1900's many Americans made their living raising
crops on family farms. The food that was grown had a two
fold purpose; it was sold to raise revenue and was
consumed by the farmers (and their families). As farmers
grew old and were unable to work in the fields they were
supported by their families who took over the business.
However, things began to change in the 1930's as the
country was shaken by the Great Depression. When crops
began to fail, the people lost not only their food, but
their ability to make a living and support their
families, including the older generation. It was at this
time that President Franklin D. Roosevelt signed into
law a program aimed at the well being of the public. The
center piece of the new plan was the idea that the
federal government should begin paying money to retired
persons over the age of 65.
Social security
payments are funded by the working public. Money is
deducted from each paycheck and contributed toward the
program. The idea is that you pay into the program
during your working years, and then enjoy the benefits
during retirement. Initially these payments were given
in a lump sum, but eventually this policy was changed to
monthly payments. Another important change was the
annual cost of living increase. This helps the SS
payments keep up with the pace of inflation.
Many people
have assumed that their Social Security payments will be
sufficient to support them in retirement, but is this
true? The answer to this question is no. Experts agree
that Social Security should be viewed as a valuable
supplement, but it should not be relied upon as the sole
source of income. The first reason for this view is a
simple matter of math. The amount of money that the
average person will receive is less than the expenses
that the average person will incur. The second reason is
that the long range future of Social Security is very
much in doubt. In a few more years the Baby Boom
generation will begin to retire in large numbers. This
means that their SS payments will be funded by the
younger generations, and that is where the problem
lies. The proceeding generations have a
significantly lower population. There may come a time
when there is simply not enough people paying into the
system to keep it afloat. As a result, many financial
experts advise younger investors to plan for their
retirement as though SS will no longer be solvent. This
will help ensure that people save an adequate amount
funds. If it turns out that Social Security is still in
operation, then the extra money will be a pleasant
bonus.
