Social Security is one of the United States’ best known and most important social welfare program.  The program, technically known as the Federal Old Age, Survivors and Disability Insurance program (OASDI), provides retirement income, health care for the elderly, and disability coverage for eligible workers and their dependents. 

Like most social welfare programs, OASDI provides a benefit that cannot be insured privately, that is floor of support to middle and lower income families in the United States.  Workers pay into the program throughout their lifetime in the form of FICA taxes.  Currently, workers only pay FICA taxes on the first $97,500 of earnings.  Those funds are then invested in safe US Government securities (bonds). 

Unfortunately, as with much of our population, the Social Security system is ailing.  The problem is pretty straightforward:  since the program is supported by younger workers, and there are relatively fewer workers in our generation than our parents’ generation, expenses will exceed revenues at some point in the future.

When will that happen?  The [1] Social Security Trust Fund is pretty healthy right now, at slightly over $2 trillion as of 2006.  However, as receipts begin to grow more slowly than expenses towards the end of the next decade, that surplus will begin to fund the deficit.  The Social Security Administration projects that, barring reform, the fund will be exhausted in 2041 - the exact same year that I will retire. 

The debate on how to reform Social Security has been long and heated.  The American Academy of Actuaries has provided a fun little game that allows us to explore possible solutions to the problem, along with the pros and cons of each solution.  Check it out here: [2] http://www.actuary.org/socialsecurity/game.html and let me know what your solutions are!