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Sunday, October 31, 2010

Social Security

The article in the Philadelphia Inquirer discussed Social Security benefits that are provided to the elderly people and how these funds are not enough for them to live off of. Social Security is a Government program that redistributes income from the younger to the older people. In the article the elderly lady named Stephanie Mikalic broke. After all of the expenses she has she still does not have enough money to purchase food and other necessities.
Social Security provides Stephanie with $1,117.00 a month and she is also receiving a pension check of $241.50 monthly. Stephanie does not have money at the end of the month; she is not able to live off of these funds. Social Security is highly depended on a lot by the elderly people depend on, but it will not be available for long. People who are working and have an income are contributing to Social Security benefits, but that does not mean that they will be able to receive Social Security when they are ready to retire. Social Security is looked at as financial security when you retire, but it will not always be there.
When you are being a productive working citizen you are able to contribute to Social Security but you can also put money away for when you retire. Elder retired people are no long being productive. There are several options available for saving for retirement. You are able to put money aside slowly while you are young in an IRA account or annuity account; these accounts are available to you at the age of 18. If a person save while they are young when they are ready to retire they will be able to live comfortable and not have to depend on Social Security benefit to live. Social Security is not a for sure thing that you will have access to when you retire. The Social Security funds are decreasing in mass amounts and more than likely will not be available in the next 45 years.
Stephanie had to request emergency funds from grants; these grants are provided by programs that are run by the Jewish Community Center. These grants are made available in very extreme cases of emergencies, but he funds are getting lower and lower. The funds for the grant are donated. Donations are getting smaller. With the emergency funds Stephanie will be able to purchase a water heater for her home. If Stephanie would have put some money away in Annuity fund while she was working she would not have to depend solely on Social Security. Being able to provide for yourself when you are no longer able to work is very important and by saving while you are young is the way to be able to do this. As a retiree you should not have to worry about being able to make it through the month.
Is Social Security a market failure? No, because technically Social Security is not a market it is a government funded program. I could be looked at as a program failure but not a marker failure, and no transactions are taking place. Market failure is when an optimal allocation of resources is not met. A market is efficient, and absent of any failures, when both parties benefit from the transactions taking place. Producers receive surplus, as do consumers. A market failure therefore occurs when one or both parties are worse off the before the transaction after a transaction takes place.
In the market for social security, since it is only the demanders of social security (the elderly) that stand to benefit from the funds, and not the suppliers of the funds (the government) then there is no market failure or room for a market.
In order for an elderly person to live comfortably they will have to try to save enough money in their working life time and try to predict how long they will live and try to save accordingly. Saving money while they are young will defiantly prevent a person from living day to day while retired. Market failure is when an optimal allocation of resources is not met. http://www.philly.com/inquirer/front_page/20101021_Daniel_Rubin__Emergency_fund_to_help_Phila delphia_s_aging_with_basic_living_expenses_is_running_out_of_money.html

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