AMAC’s ERA: An Important Component for Saving Social Security

social security cardsby Caroline Rayburn

As the representative voice of 1.2 million mature Americans and senior citizens, AMAC is deeply concerned with the solvency of Federal legacy programs – such as Medicare and Social Security.  Each of these programs provides vital benefits to a growing number of Americans and will require significant structural reforms to ensure their financial fortitude for current and future generations of retirees.  According to the Social Security Administration (SSA), approximately 58 million Americans receive Social Security benefits monthly – a number that is projected to increase as millions of Baby Boomers become eligible for retirement each year.[1]

While the program braces for an influx of new beneficiaries, Social Security faces a number of critical concerns.  The Trustees for Social Security project that Social Security will be an insolvent program by 2033 – a startling prognosis for a program on which millions of older Americans and AMAC members depend and to which they have contributed throughout their working lives.[2]  Already, American retirees are drawing Social Security benefits at a faster rate than U.S. workers are paying into the system.  This – compounded by the fact that Americans are living considerably longer – signals that the future of America’s Social Security program is at risk.

Today’s ratio of three workers per Social Security recipient – compared to the sixteen-to-one ratio of the 1950s, for example – is not sufficient to sustain the current Trust Fund payout rate.[3]  In terms of real dollars, the Social Security Trust Fund paid out $49 billion more in 2010 than it acquired from workers.  Under this existing structure, the payout trend is expected to continue – building to an estimated debt level of $6 trillion by 2036.  In 13-18 years, benefits are likely to be reduced by 25%.  Other components of Social Security – such as Social Security Disability Insurance – are in even worse condition, facing exhaustion as soon as 2016.

Future generations of Americans, in particular, stand to be negatively impacted as the Trust Fund approaches insolvency, unless immediate action is taken by Congress to address the problem.  In a recent study conducted by the Pew Research Center, “51% of Millennial Americans (ranging in age from 18 to 33) do not believe there will be any money for them in the Social Security system by the time they are ready to retire, and an additional 39% say the system will only be able to provide them with retirement benefits at reduced levels.”[4]  Strikingly, “only 6% expect to receive Social Security benefits at levels enjoyed by current retirees.”[5]

Though AMAC strongly urges Congress to address Social Security’s looming fiscal and structural problems through comprehensive legislative reform, it is perhaps more important than ever to encourage Americans to begin saving more of their own money in preparation for retirement.  AMAC has developed a new retirement savings account – the Early Retirement Account (ERA) – that enables individuals to plan responsibly for retirement.


The Early Retirement Account

AMAC recognizes that the average Social Security recipient presently collects between $13,000 and $14,000 per year.  For the vast majority of retired workers, this is the largest portion of their retirement income, and for many, Social Security is their only source of retirement income.  In 2011, SSA measured that “Social Security provided half the income for 64% of aged beneficiaries in 2011.”[6]  However, “Social Security was never meant to be the only source of income for people when they retire,” according to SSA. [7] In fact,

Social Security replaces about 40 percent of an average wage earner’s income after retiring, and most financial advisors say retirees will need 70 percent or more of pre-retirement earnings to live comfortably.  To have a comfortable retirement, Americans need much more than just Social Security.  They also need private pensions, savings and investments.[8]

Thus, the availability of an ERA addresses a problem facing many retirees: the lack of accumulated savings to supplement other sources of retirement income.  The ERA is a voluntary benefit available to all workers and is structured to enable workers to accumulate additional funds to supplement retirement income – similar in concept to an Individual Retirement Account (IRA) provided via the Internal Revenue Service (IRS) code – but with some fundamental design changes.

a)      As a voluntary benefit, workers would be required (at the start of their employment) to indicate whether they choose to participate or opt out of the ERA.  They would be allowed to start, discontinue or re-start participation at any time.


b)      Employers would be required to offer the ERA to all employees (both full-time and part-time) via payroll deduction.


c)       The minimum employee ERA contribution would be $5 per week, and the weekly maximum contribution would be $100 per week.  Employers would be permitted to contribute to employees’ ERAs in any amount or percentage, with the allowable contribution up to $50 per week.  Contribution levels would be indexed for inflation.  Employers may start or stop contributions at any time.


d)      The individual worker would be the sole owner of the ERA.  If the worker changes jobs, the ERA would be transferred to the new employer, who would be required to allow payroll deductions for continued contributions.


e)      No withdrawals from the ERA would be allowed until the worker reaches age 62, or upon death or total disability.  At any point between age 62 and 70 ½, workers would be allowed to receive payouts from the accumulated funds.


f)       In the event that the worker dies before withdrawing the accumulated funds, the death benefit would be the accrued value at the time of death.


g)      Similar to the IRA, employee and employer contributions to the ERA would be treated as pre-tax contributions.


h)      An appointed board of investment experts would establish a list of approved investment options, operating under the premise that 50% of the funds would be mandatorily invested in guaranteed interest accounts or annuities.  The remaining 50% would be allocated to investments approved by this board.  All administrative costs would be borne by the individual investment plan providers and not by the Federal government.


The ERA: A Lockbox for Retirement

                Unlike other forms of tax-deferred investment vehicles, such as the traditional IRA, the ERA does not contain provisions for loan withdrawals or hardship withdrawals.  The ERA adheres strictly to its own provisions in order to create a true lockbox for workers when they retire.  Though many Americans often choose to pay a penalty to access funds in their IRAs prior to the eligible age, they do so at the expense of their retirement and defeat the purpose for which the fund was established in the first place.  The total objective of AMAC’s ERA is to create a supplemental source of funds at a time when they are most needed.

In addition, AMAC developed the ERA for workers who do not have access to a personal investment account through their employers.  Fifty percent of businesses in America offer no 401k or pension plan, crippling workers’ abilities to adequately invest, plan and save for retirement.  The ERA gives all American workers an opportunity to prepare for the future and to manage their finances in a disciplined manner.  With an ERA, workers can watch their investment steadily grow over time and have peace of mind as they look forward to retirement.


Advantages of Investing in the Free Economy

                AMAC overwhelming determined that investing in the free economy – as opposed to investing in the Federal government – yields the greatest returns; thus, the ERA fully invests participants’ funds in the free economy.  With half of the funds invested in guaranteed, low-interest bearing accounts or annuities and half of the funds invested in secure companies – like those in the S&P 500 – AMAC expects the ERA to produce a substantial retirement fund over the course of workers’ careers.  Workers have complete control over the amount of money they choose to put in their ERAs – giving individuals the freedom to manage and adjust their accounts over time in accordance with financial ability and need.  ERA investments are risk-managed and intentionally avoid entanglements with precarious, start-up companies, currency exchanges or money markets.  Designed to foster a disciplined, long-term approach to retirement planning, AMAC strongly believes that the ERA enables Americans to retire comfortably while alleviating dependence on Social Security.


Examples of projected savings from the ERA

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


Contribution ERA fund at age 62
25-year-old wage earner $15 per week $165,407
25-year-old wage earner $45 per week $352,389


Upon careful study and review of the historic rate of returns over the last 100 years, AMAC was able to calculate the amount of money an individual could potentially have in his or her ERA upon retirement at age 62.  Indeed, if a worker began investing modestly in an ERA early in his career, then he could have a strong retirement fund – accessible at retirement – on which he could rely to supplement other sources of income and to reduce personal dependency on Social Security.



AMAC’s Early Retirement Account is a viable, commonsense solution to a serious problem vexing older Americans today – that is, a lack of savings to supplement income at retirement.  The ERA is a straightforward, simple proposal that would allow hard-working Americans to invest, plan and save properly for retirement.  Taking advantage of low-risk, free-economy investment opportunities, the ERA enables workers to grow their funds steadily and securely.  For many people who do not have access to a 401k or pension plan, availability of an ERA may be their only opportunity to cultivate a robust savings fund that can follow them throughout their careers and help them retire comfortably when the time comes.

The current economic landscape in America demonstrates the desperate need for an investment vehicle like the ERA.  Restrictions on ERA withdrawals ensure that the funds are preserved for retirement and act to discourage and avert spending for alternative purposes.  This lockbox allots seniors the peace of mind they deserve following a lifetime of hard work.

As a whole, retirees continue to overly rely on Social Security as their primary source of income during retirement; yet, Social Security remains on an unstable fiscal path.  According to SSA, “Social Security is not sustainable over the long term at current benefit and tax rates.”[9]  While AMAC urges Congress to act immediately and comprehensively to reform this important program for generations of Americans, AMAC continues to emphasize personal responsibility when it comes to planning for the future.  AMAC strongly believes that the ERA fosters prudent fiscal behavior and protects seniors from experiencing financial hardship later in life.

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[1] “Social Security: Understanding the Benefits.” Social Security Administration. 2014. Pg. 4. http://www.socialsecurity.gov/pubs/EN-05-10024.pdf.

[2] Ibid., Pg. 37.

[3] Ibid., Pg. 36.

[4] “Millennials in Adulthood: Detached from Institutions, Networked with Friends.” Pew Research Center. Mar. 7, 2014. http://www.pewsocialtrends.org/2014/03/07/millennials-in-adulthood/.

[5] Ibid.

[6] “Social Security.” Social Security Administration. Pg. 2.

[7] Ibid., Pg. 4.

[8] Ibid.

[9] Ibid., Pg. 37.

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Wilberta Veale
5 months ago

The Social Security Trust funds hold no cash. There are only security certificates for the Securities that the United States Treasury Department purchased with the portion of the payroll taxes targeted to the Social Security Trust Funds. Then the United States Government spends the money. About $2.9 trillion is “owed” to the Social Security Trust Funds (including interest on the Securities).
The only way to pay this back is through sales of federal assets or via Federal Income Taxes. As of 2019-2020, there was not enough coming in via Payroll Taxes to pay for the outgoing Benefits. But the level of securities that had to be redeemed to pay the difference was not great ($100,000,000 or something like this). But as the Boomers start collecting, this number will increase….. just as there was an increase in the incoming Payroll Taxes during the Boomer working years that the Government enjoyed having to spend.
President Ronald Reagan was savvy on the Social Security Act.  And it wasn’t lost on his administration that the bulk of the Baby Boomers were in the workforce (his admin 1980-1988)(Baby Boomers 1946- 1962). He raised the payroll taxes.  This gave a boost to his spending power.   All legal within the Social Security Act of 1935.  Any excess payroll taxes not needed to pay benefits can be used to purchase securities.  But there wasn’t much there as excess before the boomers.

Today some people are paying income taxes on their social security benefits.  These taxes go back into the payroll bucket used to buy securities and then the money is spent by the Federal Government.  All well and good until 2019/2020 when the Payroll taxes coming in weren’t sufficient to pay for the Benefits being paid out.  Something around $100,000,000 shortfall.

The pandemic has enlightened me on how Americans really feel about their elderly.  Many of these people that feel their children are more important than any elderly people.  I feel that this country benefitted from someone else’s children for over 40 years, and these same people that don’t care about the elderly also benefitted from the payroll taxes paid buy the baby boomers.  The county took the boomers money, promised them social security when they retired and even told them how much they would get when they retired.   Anything less than they were told they would get is an abuse of a people that kept this country running for so many years!   The United States of America owes their people this money and they damn well better pay it back!   

Edward C Smith
6 years ago

Why is not anything being done in removing the taxes on our ssi ,after we already paid and receiving ssi and still being taxed still. We should not be taxed on our ssi, we are over 65, YOUR NOT STOPPING THESE TAXES. We have already paid taxes on this, while we worked. Are you only for rich, protect them, not stop taxing ssi. Anybody who (over 65) receives ssi should not be taxed on their ssi!!!! WE HAVE ALREADY PAID, THIS IS OUR MONEY, WE HAVE ALREADY PAID TAXES ON!!!! Do something about it, OR are you just like AARP PROMISES ARE MADE TO BREAK JUST GET US SENIORS TO JOIN, FOR OUR MONEY!!! WAKE UP!!!

should not be taxed

Robert A Hirschmann
6 years ago

What is a “trust fund”? If social security was set up as a trust fund wouldn’t it be protected from the politicians “borrowing” from it? If the trust fund was left alone and was drawing interest all these years wouldn’t it be solvent now? I don’t think FDR set it up so the government could tap into it. IOUs do not draw interest. And, since we are just about bankrupt there is no way to pay it back.

I understand that social security was not meant to be the sole source of income and agree with that. However, in my case, my IRA ran out a long time ago, I can’t get a job (at 77 years old) and my only income is social security. Now I’m between a rock and a hard place and I don’t think I’m alone. If social security dries up and the checks stop coming I, along with many others, will be on the streets, homeless and grubbing through garbage cans looking for food.

Wilberta Veale
5 months ago

Actually the Social Security Act of 1935 was set up so that the United States Government could sell Special Securities to the Social Securities Trust funds when there was the amount coming in from the Payroll Taxes exceeded the amount needed to pay out in benefits. Then the Government could spend the money from the sales of these securities.

6 years ago

A Little off topic — but why is Social Security – funded by ourselves, going broke when WELFARE and Foodstamps have an endless source of funding? Just askin’……

Ivan Berry
6 years ago

a) People getting in/out randomly would be an administrative headache to esp. small business payroll and accounting departments.
b) Mandates to employers have costs. This mandate constitutes rules. That means more regulation.
c) Ditto, PaulE on this.
d) More mandates, rules, regulation. More costs and don’t forget randomness from “a” above.
e) Even in the event of a medical emergency for a grand child, you could not use this money even if medical insurance refused to cover. Your money you cannot spend except as mandated. What ever happened to free choice and personal responsibility?
f) Like life insurance. Do you specify beneficiaries or does it go into the estate?
g) Must require legislation. What any Congress passes, another can change.
h) Unclear as to who appoints the board. Experts have been doing such a wonderful job. Prior selection of approved instruments limits free choice. Annunities are insurance instruments with additional costs for commissions, etc.
All told, limiting choice is a disadvantage to those who study the markets and have knowledge often beyond that expressed by the experts. Had many of us listened to experts we would have been worse off. Some prefer to choose their own advisers and not rely on someone else’s selection. Administrative costs are an unknown amount and vary with selection of providers. Will these costs be competitive with commercial operations?

Taking into consideration the level of inflation even at the governments false figures, the money resulting from the examples would have purchasing cut by more than in half. Were the true inflation rate used, it would be much less.

This is a good place to start the debate as how to fix an ongoing problem, but is somewhat premature in initiation.

6 years ago

Maybe I’m missing something, but wouldn’t it be more practical and ultimately more efficient, from getting actual legislation enacted, if instead of proposing a separate, new program called an ERA, that many of these proposed changes be accomplished by revising or amending the existing structure of IRAs? Modifying an existing program would seem far simpler than creating a whole new entity from the bottom up. Just a thought.

On some of your proposals for the ERA, how did you arrive at the minimum and maximum amounts in item C? To encourage the concept of savings in the American culture again, why are you setting any maximum at all? After all, part of the problem America has with retirement is inadequate personal savings. That is why Social security is the sole means of retirement income for so many people. So I would think you would want to encourage people to save all they can for retirement.

Item H is a scary item and should be re-thought. Do you really propose having some government board decide what are “approved” types of investments and percentages of each for inclusion in this retirement savings vehicle? Do you envision having the IRS or some other federal agency doing annual reviews to ensure the allocations within one’s ERA would meet the approved types and percentages? I can just see the line forming around the block as every lobbyist starts wining and dining the members of this board to ensure their clients get “selected” for the “approved” list. It’s one thing to publish a list of recommended investments for inclusion, along with why one should consider that type of investment as part of your ERA . It’s completely another to create what appear to be mandates concerning “approved” types and percentages for the overall account. Three worlds spring to mind whenever I hear board or government approved associated with anything. They are”conflict of interest”.

Van Hamlin
6 years ago

I like the concept but I think that it is short sighted given the changes in healthcare and US tax structures. We must allow workers to engage in programs that create two forms of Gross Income Adjustments. First, workers must opt for a differed health care account (hybrid HSA). The hybrid HSA must allow workers to contribute the equivalent to the annual cost of the workers health insurance plus $3000.00 for uncovered expenses. these expenses must cover; such as deductibles, medicine glasses or birth control. These hybrid HSA accounts must be dynamic in that money can be deducted as bills arise. The hybrid HSA ballance would rollover to the next year. Second, create a differed retirement account such as the ERA, in a 401k, or 403b/ 457 design, with a maximum of another $17,500 + $5,500.00 catch-up contribution of income.These funds should be dynamic in that money from a 401k could be moved without penalty into the HSA once the HSA was depleted down at a $100.00 balance. This HSA and ERA money would be invested in conservative instruments aimed at preserving wealth rather than growing wealth. The surplus funds accumulated in these accounts at a young age would buffer out of pocket expenses during old age.

My plan allows the worker to meet their healthcare obligations up to the time Medicare kicks in and then acts as a supplement to the Medicare benefits. It also creates the income buffer described in this article. In addition, this would bring everyone’s adjusted gross income down by a significant amount. This gross income adjustment would place more people into the poverty level and remove them from tax rolls for that year. This might assist workers in obtaining a lower rate on government health insurance, as well.. All differed money would become taxable at 70.

Kyle Wright
6 years ago

I support any initiative or idea in which the individual is empowered to take responsibility for their own future and destiny. When people become dependent upon the government or any other entity to take care of them, they yield their responsibility to that government. They enslave themselves to it. An easy escape when it does not go well, because it was someone else’s fault, not their own.

Buisnes’s could potentially attract a better caliber of people by offering more matching funds, showing commitment to the employee and achieving a better skilled and loyal employee, a win for both the company as well as the employee.

This is a good foundational plan, but unfortunately, it will be tinkered with and altered over time from each administration. If we could only keep government from dickering around with sound and fundamental plans which benefit the public as a whole the results would definitely empower the citizen instead of the government.

Alfred L Moniot MD
6 years ago

The concept of an ERA is wonderful, but I think the “weekly” accounting for deposits will be a nightmare.
I retired 31 Aug 2003 at age 58.75 after having paid MAX SS portion of FICA for 35 + years (none since), and took MAX SS retirement benefits (reduced for age) untaxed since at 62.
That allowed be to virtually ignore W/Ds from my IRAs, but I am required to take RMDs beginning next year
Paid off my last debt – a 15 year residential mortgage 4 years early in 1991; saved every tax-advantaged dime and lots more, and was fortunate to sell several homes at favorable price points on favorable dates over many decades (for nice untaxed capital gains).
Sorry, I’m preaching to the choir.
retired expatriate (11 years in Conde Nast’s 2013 “World’s Best City”)

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