Independent Womens Forum
Published on August 26, 2014
168 — LEAN TOGETHER to encourage more individual saving both for retirement and for other important needs. our aiLinG PubLiC Pension sysTems Our government-run public pension systems are supposed to be an important aspect of Americans’ overall retirement savings plan. Indeed, Social Security provides a majority of retirees with a majority of their retirement income, and payments into Social Security are the largest tax the average working American pays each year. In addition to Social Security, governments at all levels operate pension systems for some government workers. Given that today government employs about 16 percent of workers, this ends up playing a signicant role in the country’s overall retirement security. 1 Yet sadly, while these programs are critical, they often have signicant nancial problems. Most public pension systems are seriously underfunded, which means that they may be unable to pay all benets that have been promised to current retirees and to the workers currently contributing to the program today, who expect future benets. That also means that these underfunded programs are a signicant liability for taxpayers, since governments will turn to current and future taxpayers to pay more so they can make good on promised benets. scl sct Today, nearly 40 million Americans over age 65 receive Social Security’s retirement benets. The average retired worker receives a monthly benet of $1,251.36. 2 For two-thirds of seniors, Social Security accounts for more than half of monthly income, and for more than one-third (35 percent) of seniors, Social Security accounts for more than 90 percent of monthly income. 3 This means that Social Security is a critical part of America’s nancial security system. Unfortunately, the program itself faces signicant nancial problems of its own, because it relies on what is known as a pay-as-you-go system. That means that taxes collected today are used immediately to fund benets to current retirees. Nothing is saved for the future.