The Basics: Social Security Reform has been revised for 2005. Featuring statistics, graphs, and accessible descriptions of how Social Security works, who it affects, and the debate about its future, this pamphlet has long been a popular resource for straightforward information about the program. This edition features a new final chapter on how the current drive to privatize the program would jeopardize Social Security's financial health and endanger the prospects for a secure retirement for millions of working Americans.

Download the complete Basics pamphlet in PDF format, or email basics@tcf.org with your address to receive a copy by mail.

Media inquiries should be directed to Christy Hicks (hicks@tcf.org or 212-452-7723). Read the press release (PDF).

From the introduction to The Basics: Social Security Reform:

President George W. Bush repeatedly has emphasized that one of his foremost second-term priorities is a fundamental transformation of the Social Security program into a system that includes personal investment accounts. Enacted in 1935 and amended many times since, most recently in 1983, Social Security provides benefits to workers and their family members upon retirement, disability, or death. Since the program’s inception, the size of those benefits always has depended on the earnings of workers over the course of their careers. President Bush wants to change the system so that in the future the amount that each worker collects from Social Security upon retirement would depend on the performance of investments in his or her own personal account.

Much is at stake in this debate. More than 96 percent of workers pay Social Security taxes and are thereby entitled to collect benefits from the program. More than 47 million Americans today receive checks from the Social Security system. Although the average monthly payment to those individuals is a modest $895, Social Security constitutes more than half of the incomes of almost two-thirds of retired Americans. For one in six, it is their only income.

Transforming the system to create new personal accounts for younger workers while continuing to provide payments owed to today’s beneficiaries requires a huge infusion of additional money. Although the president had not proposed a detailed plan as of the date this pamphlet was written, most analysts expected the creation of private accounts to require new federal borrowing amounting to trillions of dollars. That additional debt could constrain significantly the nation’s overall economic performance and the scope of federal activities years into the future.

President Bush and others who support his approach argue that such dramatic changes are necessary because Social Security faces a financing shortfall. According to the Social Security Trustees’ latest estimates, based on intermediate economic and demographic assumptions they deem to be neither optimistic nor pessimistic, Social Security will continue to be able to pay benefits in full until its Trust Funds are exhausted in the year 2042. After that, funding would be sufficient to provide about 73 percent of currently promised benefits. For perspective, it is worth noting that in 1997, the Trustees predicted that the Trust Funds would run out in 2029. So without any changes to the program, the nation’s improved economic performance added thirteen years to the estimate of when the system would face a genuine crisis.

The reason why Social Security faces a long-term financing challenge, as most people know, is that the huge baby-boom generation born between 1946 and 1964 will be eligible to begin retiring in about 2008. They will place a strain on Social Security because a smaller share of the U.S. population will be working and contributing taxes to the system relative to the number who will be collecting benefits.

The retirement of the baby boomers was already on the radar in 1981 when President Ronald Reagan created a commission headed by Alan Greenspan, now chairman of the Federal Reserve, to strengthen Social Security. At that time, the Social Security Trust Funds were nearly depleted, and the Greenspan Commission recommended that those funds be substantially bolstered to avert another such crisis as the boomer generation retired. Those reforms, enacted in 1983, are projected to keep the Social Security program solvent through 2042. Right now, Social Security has reserves in excess of $1.5 trillion, and those reserves are projected to rise to more than $6 trillion over the next twenty-five years to absorb the impact of the baby boomers’ retirement. It should be noted that by 2042, the majority of the baby-boom generation will no longer be alive.

Whether one favors or opposes the creation of private accounts, the plain fact is that they would make the challenges facing Social Security more immediate and severe. The problem is that financing the accounts while sustaining payments to today’s beneficiaries requires drawing down the Trust Funds’ reserves much more rapidly, resulting in their depletion about twenty years sooner than they otherwise would be.

It is no exaggeration to say that Social Security has never been more likely to be subject to fundamental restructuring than it is today. That is why, aside from matters of war, the debate over the program’s future is more important to the country and its citizens than any other issue before Congress. In the end, the right decision will depend on an informed public. This pamphlet, the fifth updated edition, presents the best available facts, figures, and arguments about what is right with Social Security, what is wrong with it, and the strengths and weaknesses of proposals to convert it into a system reliant on private investment accounts.