04/13/2011 04:13 pm ET Updated Jun 13, 2011

Why Retirement Savings Matter Now

Social Security, while in the center of a heated national debate, is not the number one issue on the mind of a college student. With more immediate concerns, such as the current job market and rising college tuition costs, retirement benefits fall to the bottom of the worry list. I'm no exception to this. While I would consider myself politically engaged and up-to-date on current affairs (translation: news junkie), Social Security had never really entered my radar until recently.

A few weeks ago, during a Sociology lecture on aging, we discussed the "graying of America" and the impacts this phenomenon has on American society. The professor shared with us that he believed that Social Security would no longer exist by the time my generation was old enough to collect it. One particularly enterprising classmate recommended private accounts, sharing with me that that if you put $2000 into a savings account every year between the ages of 20 and 30, you'll be set for life. Said future finance guru is the same student who announced earlier that he is paying his way through college with the stock market, and it is working out for him. I'm planning on calling him as soon as I have enough money to my name to need someone to tell me what to do with it, but that day has yet to come.

While retirement seems too far away to even conceptualize right now, learning about and forming an opinion on Social Security is important for two reasons. The first is more practical, being that unless someone can get Betty White to share her age-defying secrets with the rest of us, we will eventually need to collect retirement benefits. As the end of tax season looms, many of us are currently paying into a system that some politicians intend to do away with before we have the chance to reap the benefits.

The second reason is more abstract. Politicians from both ends of the spectrum tout the importance of leaving the country in the best possible shape for the younger generations, but all too often they neglect to ask our opinion on what we want this country to look like by the time we are ready to take the reins. The effects of the absence of a government run retirement program are numerous and show that these divisive issues dictate what this country looks like. Social Security is the largest and most generous disability program in this country. It provides more than half of yearly income for two out of three seniors and without the program, the rate of poverty among the elderly would rise from 1 out of 10 seniors to roughly 4 out of 10 seniors. Every year, Social Security keeps 20 million US citizens above the poverty line. Forming our own opinions on these issues rather than regurgitating information gathered from pundits and politicians allows us to articulate the direction in which we feel the country should be going.

If you think about the idea that Social Security will eventually stretch beyond its limits from a logical standpoint, with no prior knowledge of how the system operates, it makes sense. This country is suffering from enormous deficit problems at both the federal and local levels. The "Baby Boomer" generation, those born between the years of 1946 and 1964, is one of the largest in history and they're beginning to retire. It seems that once they have all retired, Social Security would be wiped out and subsequent, larger, generations would not be able to collect the same benefits.

While the system is certainly not perfect, it is not impossible to sustain it in the future. First, it is important to note that Social Security is legally prohibited from contributing to the federal budget deficit. Social Security is financed by a specific payroll tax, and the excess from these tax revenues goes to purchase US bonds. The entire program is funded by the Social Security payroll tax and money from the bonds, which are held by the program's trust funds.

The Social Security Trustees found that in it's current state, Social Security can pay all benefits through 2036. After 2036, it can pay 78% of benefits. However, the amount of money that constitutes "full benefits" is adjusted every year for inflation, so 78% of benefits in 2036 will be more than 100% of benefits in 2011. There are also simple adjustments that can eliminate any impending Social Security deficit. For example, if the income tax were raised roughly 1.1% on the part of both employees and employers, Social Security's deficit problem would be solved. By applying the income tax to all earnings including over $106,800 yearly, the program would be in surplus by 2036 when the projected shortfall is expected to begin, as the current Social Security tax applies only to earnings up to $106,800.

Issues like Social Security can seem too daunting to tackle, and young people are often taken out of the conversation. However, legislation drafted and passed today affects us more directly than the current leaders. Take the time to form your own opinions rather than allowing those in charge tell you what to think.