Final answer:
The U.S. government's involvement in retirement savings through Social Security is essential due to individuals' struggle with adequate financial planning and saving for old age. The sustainability of Social Security is in question due to an aging population and a decreasing ratio of workers to beneficiaries, demanding potential reforms to the system.
Step-by-step explanation:
The government involves itself in retirement savings through Social Security due to several challenges individuals face when saving for old age on their own. A significant number of people are poor at saving for retirement, with only 47% of Americans having a rainy day fund. Economic factors from the Industrial Era, such as labor-intensive jobs that couldn't be sustained into old age and urban widows with no wage-earning skills, initiated the need for reforms like Social Security.
Social Security's viability is at risk due to demographic changes, with the baby boomer generation retiring and fewer workers contributing to the trust fund. The pay-as-you-go system means current workers' payments fund retirees' benefits. As the ratio of workers to beneficiaries declines, the system faces sustainability challenges, necessitating potential reforms such as benefit reductions, increased retirement age, or changes in payroll taxes.
The scale of the program is immense, with Social Security constituting the largest government expenditure. Linked to safety nets' broader role, government intervention helps to mitigate market failures in private retirement savings and provide a layer of financial security for the elderly population, who are at risk of poverty without these benefits.