How growing income inequality is hurting Social Security

by Rachel Baker on February 11, 2015

A new report came out Tuesday, from the Center for American Progress, claiming income inequality is a direct threat to the fiscal health of Social Security. I don’t really think this is new news, but its interesting and always good to have the information in a report, right? At least it gives one something to ponder.

If this is true, there will have to be some long-term changes to way the country does business that will take care of our older citizens. Once upon a time, we took in our grandparents and parents when they got too elderly to live on their own. Now, we ship them off to assisted living homes, like we do our kids to college. Seems like if by 2033, Social Security has eaten through funding reserves, we may have to consider planning our retirement with the idea that our parents will be living with us.

Here’s the Article: How growing income inequality is hurting Social Security

The nation’s old-age pension and disability insurance program is funded by a payroll tax that this year applies to wages of $118,500 and below. But the amount of revenue coming in is not as large as it could be, now that an increasing share of wage growth is going to people who make more than that, and the wages of many Americans are stagnant, or even in decline. That is adding fiscal stress to a program already struggling with the demands of an aging population.

With more Americans reaching retirement age, Social Security is projected to eat through its funding reserves by 2033, assuming Congress took no action to bolster its finances. If that happened, Social Security trustees have said the program would be taking in only enough money to pay 75 percent of promised benefits—an unthinkable fate for a program that nearly two-thirds of seniors rely on for most of their retirement income.

“Upward redistribution of income in the United States has meant that income has shifted away from the workers whose full earnings are taxed and toward high-income workers whose additional dollars are exempt,” read the report.

This article was written by: Rachel Baker – Click to follow on Twitter.

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