Save Social Security Now
The AMAC Social Security Guarantee
“We need to Save Social Security, and we need to save it now”
Dan Weber, AMAC President and Founder
We are in trouble!
In 2010 the Social Security Administration paid out 49 billion dollars more than it took in. If this rate of deficit continues, benefits will be cut by 25% for the next generation, and by 2036 Social Security will be 6 trillion dollars in debt. The numbers are staggering and the outlook for future generations is bleak. If we hope to keep the Social Security program solvent for the next 75 years the problem must be addressed now. AMAC’s founder, Daniel Weber, has proposed a simple solution for rescuing our Social Security system that is gaining bi-partisan support and has a real chance of success if we all come together in this effort. This simple solution combines earlier proposals from several Senators with the addition of an optional IRA.
The AMAC Social Security Guarantee
AMAC’s proposal has two Prime Directives. First; to maintain the same or increased benefits for those with lower earnings. Secondly, to provide a means for all earners to have more income available at retirement. We believe this proposal succeeds in achieving both of those directives, while restoring solvency to the Trust Fund.
The Prototype Plan – Keep basic Social Security, guarantee Cost of Living increases each year.
1. IMPLEMENT A TIERED APPROACH TO THE CALCULATIONS OF COST OF LIVING ADJUSTMENTS (COLA) AS FOLLOWS:
- a. For Beneficiaries with a household income (AGI) level less than $20,000, set an annual COLA range of 3% minimum – 4% maximum.
- b. For Beneficiaries with a household income (AGI) between $20,000 and $50,000 set an annual COLA range of 1.5% minimum – 3% maximum.
- c. For Beneficiaries with a household income (AGI) of $50,001 or higher, set an annual COLA range of 1% minimum and 2% maximum.
Note: in 2009 and 2010 there was no Social Security increase even though gas and food prices rose. Under this plan, all retirees will always have an increase each year.
2. IMPLEMENT A SETBACK IN THE RETIREMENT AGE FOR NEW RETIREES,
- a. Starting in 2016, phase in a change in the earliest retirement age (EEA) by adding three months each year so that by 2023 the EEA would be age 64, instead of the present age 62.
- b. Starting in 2017, phase in a change in the normal retirement age (NRA) by adding three months each year so that by 2024 the NRA would be age 69, instead of the present age 66-67 depending on birth year.
3. CHANGE THE LEVEL OF PAYMENTS FOR FUTURE RETIREES STARTING IN 2019
Adjust the Primary Insurance Amount (PIA) keeping lower income earners benefits the same and lowering benefits for higher income earners.
AMAC has examined the many proposed solutions presented in the intermediate assumptions portion of the 2012 Trustees Report and selected the alternative we feel provides the best solution, when combined with our other recommendation, to achieving long term solvency.
B1.4 Progressive price indexing (50th percentile) of PIA formula factors beginning with individuals OASDI benefits in 2019: Create a new bend point at the 50th percentile of the AIME distribution of newly retired workers. Maintain current-law benefits for earners at the 50th percentile and below. Reduce the 32 and 15 percent formula factors above the 50th percentile such that the initial benefit for a worker with AIME equal to the taxable maximum grows by inflation rather than the growth in the SSA average wage index.
Proposed by the Social Security Advisory Board
Source: 2012 Trustees Report
The AMAC Social Security Guarantee prototype plan combines the three provisions shown above and it includes the addition of a new benefit that we feel Social Security must include if it is to help and encourage workers to attain a secure retirement.
Early Retirement Account added as a companion voluntary benefit
- A new Retirement Account that allows workers to retire at age 62, prior to receiving Social Security.
- Provides additional funds for retirement for all workers
Why a new Early Retirement Account? The average person receiving retirement benefits collects slightly more than $14,000 per year. The majority of retired workers rely on Social Security as the largest portion of their retirement income. For many Americans, Social Security is their only source of income. There is an urgent need to help workers save more for retirement.
The Early Retirement Account (ERA)
- Voluntary ERA for both employee and employer
- Tax deduction for employee and employer
- Paid via payroll deduction, employer provides the contribution slot to employee
- After the ERA becomes available, employer must offer to all employees (full and part time)
- When new employees are hired, they must opt out of the ERA or they will be enrolled at $10/week
- The weekly minimum is $5, the weekly maximum is $100 or $5,200/year
- Employer may elect to contribute to employees’ Early Retirement Account in any amount or percentage of pay they choose up to $50 per week ($2,600 per year)
- The employer may start or stop their contribution at any time
The individual is the owner of the Early Retirement Account
- Portable; if wage earner changes jobs, the new employer must add payroll access for ERA
- Only available to wage earner at age 62 or because of death or total disability
- Wage earner may elect to start receiving payouts at any age between 62 and 70 ½
- Death benefit is the accrued value of account at time of death
- Benefit and Early Retirement Account earnings are tax deferred
- Contribution is indexed for inflation ( $5 week raised to $5.15 week if 3% inflation, etc.)
Investment options for the Early Retirement Account
- 50% of the funds must be invested in guaranteed interest accounts or annuities
- The other 50% may be invested in any approved investment (i.e. S & P 500 index)
- A volunteer board of investment experts creates lists of approved investments to assure quality
- Investment choices would be similar to those used in 401k plans and IRAs and the cost of administration would be borne by the same providers who offer those plans, not the federal government
|Examples of projected savings from the Early Retirement Account|
|Assumptions:||50% of funds in a guaranteed account earning 3%.*
50% of funds invested in S & P 500 index, average return of 7% *
Modest employer contribution of $50/per month, $600/year
A 25 year old wage earner contributing only $15 per week, using the above assumptions, would have accumulated $165,407 by age 62.
A 25 year old wage earner contributing $45 per week, with the same assumptions, would have accumulated $352,389 by age 62.
* Historical average returns
How the AMAC plan achieves solvency
The projected shortfalls in the Trust Fund are shown in the Trustees annual report.
There are two actuarial projections used; the Long-range balance and the Annual balance in the 75th year from the report.
Both balances are in the negative, the Long- range balance is expected to be -2.67 and the 75th year balance is projected at -4.5.
The AMAC proposal combines three different changes, each improves both of the actuarial balances and the total effect could achieve the goal of showing positive balances.
It must be understood that because of the interaction of the changes on each other, AMAC cannot predict, for certain, that the total results will cover the entire shortfalls.
The office of the Chief Actuary will be asked to conduct the rigorous and detailed analysis required to determine if a true surplus in the Trust fund will likely occur.
The following outlines the potential improvements in the actuarial balances that could possibly result from the three changes.
|Proposed change||Long-range Actuarial Balance||Annual Balance in 75th Year|
|Change in COLA||.67 est.||1.25 est.|
|Extend EEA from 62 to 64 and NRA from 66 to 69||.96 est.||.86 est.|
|Change level of benefits||.94||2.51|
|Balances after changes||-.10||.17 (plus)|
|Note: When several changes that improve the actuarial balances are combined, the net effect will often change the value of each individual proposed change.|
For additional information contact:
Association of Mature American Citizens, AMAC.
President, AMAC 312 Teague Trail, Lady Lake, FL, 32159 | 888-262-2006
Legislation, The Charles Group, 322 Massachusetts Ave. NE Washington, DC 20002
202-546-4467 | [email protected]
The Social Security Report – Powered by AMAC
AMAC’s Social Security Report website is designed to serve as a resource for anyone interested in the state of our Social Security program. By providing daily updates on major, breaking news and legislative developments affecting Social Security, by reprinting quotes and comments that reflect the insights of key political figures involved in shaping Social Security policy, and by maintaining an on-going catalog of questions and answers relevant to topics of interest to the public, AMAC seeks to keep all Americans up-to-date on the Social Security landscape.
The site is presently sponsored by AMAC, but shortly the AMAC Foundation will become the owner of the site and be responsible for its administration.
Our objective with this site is to provide a “go to” place for Congressional Aides and their Senators and Representatives, along with the general public, to keep abreast of Social Security’s ever-changing topography. We invite feedback and commentary from informed parties as part of our quest for open dialog on one of the nation’s most critical programs for the elderly.