Social Security System
Social security is one of the largest single government6 in the world currently and accounts for almost 24% of the total US spending. Various changes have occurred in the social security system since it was incepted. It has continued to face significant challenges and currently faces unpromising future expectations.
Social Security Funding
Social security is funded through the deduction from the payroll tax. The employees and the employers usually pay 6.2% of their total wages and can pay up to a maximum taxable amount of $128,400. However, the self-employed also pay for social security in which they are required to pay 12.4%. Apart from payroll taxes, social security is also funded from net interest income that is earned by the assets of the trust (US Treasuries), Reimbursements from the General Fund, and Taxes assessed on asocial benefits. However, the highest percentage of funding comes from payroll tax while others contribute to just a smaller percentage. The payroll taxes are usually set by the law (Wathen, 2016).
How the Social Security System Works
The social security system works differently from other financial institutions. Usually, once you pay money into the social security system, the money gets directly paid back out to the other individuals who at that time are getting social security checks. This arrangement ion the system came out from how the system was started. After it was implemented, many people need benefits, and there were no began money hence it was decided that all those who are employed could pay as then their money is used to pay those who needed the benefits. The precise aim was that despite the system having no money to start, the system would continuously fund itself since those retiring could get paid by people who are currently working. The system works differently with the 401 (k) that most individuals' are used to. Most people usually get worries about what happens to the excess money that the system collects. The system precisely uses surplus money to buy US treasury bills. Soon, the social security system is expected to start cashing in the bonds; hence the government will have to make good on them with tax revenue (The United States Social Security Administration, n.d.).
Changes made to the Social Security System Since it was Incepted
Social security was created back in th
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