If there’s one thing the global pandemic should have taught us, let’s hope saving money for unforeseen events is one of them. The savings Americans should have had in the bank but did not in 2020 greatly contributed to distress and misery. Financial experts have long advised that everyone needs at least six months’ income readily available for emergencies. True, Coronavirus was never anticipated, but of course, that’s the point. We can’t know when a storm will strike our home, we will lose our job, or our vehicle decides it is expensive repair time, much less endure a pandemic. Savings allow people to get through challenging, unanticipated circumstances.
Consider AMAC’s Social Security PLUS plan. The “PLUS” denotes an extra retirement account that may be accessed at age 62 or later in addition to the Social Security program from which 65 million Americans currently receive benefits. Consider some alarming data: Fifty million Americans have no retirement plan; the average person receiving retirement benefits collects just over $16,000 per year; a surprising 35% of Americans have no money set aside for retirement at all, according to a 2020 FinanceBuzz survey.
Accordingly, the majority of retired workers rely on Social Security as the largest portion of their retirement income, and for many Americans, Social Security is their only source of income. Hence, AMAC is responding to the urgent need to help workers save more for retirement. Limited exceptions could allow for early withdrawals for emergencies, but the plan is mainly intended for retirement to complement Social Security’s relatively low replacement rate of one’s working years’ income.
The AMAC plan is voluntary for both employee and employer. Its goal is simple—to provide additional retirement funds for all workers with access to the monies as early as age 62, the current early retirement age for Social Security. This is neither big government dictating behavior, nor an employer mandate, nor a new regulation on any entity.
Some of the specifics of the plan are these: the employee is the owner of the funds; no taxation to the employee on growth or receipt of funds and no required withdrawals (like Roth IRA); employer contributions are tax-deductible; employee contributions are after-tax; employer contributions may be stopped or started at any time. AMAC suggests 20% of the funds be invested in guaranteed interest accounts or annuities and the other 80% invested in any approved investment (i.e., S&P 500 index). 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.
Turn $25 into $1 Million.
A 23-year-old employee contributing $25/week in year one and an employer contributing $15/week, with both adding 4% annually thereafter, in a mix of 80% stock funds and 20% conservative investments, would accumulate over $1 million by age 65. If the employee started at $40/week, using the same other assumptions, he would accumulate $1 million just after age 61. While current retirees would not be able to take advantage of Social Security PLUS, we believe the idea is a game-changer and essential in assisting successive generations to safeguard their futures. Who wouldn’t want to see their children and grandchildren delay some gratification in their younger years for the promise of a financially secure retirement? And remember, Social Security PLUS is in addition to, but not in any way, a replacement of, traditional Social Security benefits.
We urge people to call or write their member of Congress to support the idea that no one has more of a right to their own savings and for it to grow than the individual who earned and saved the money. Ask them to support Social Security PLUS. To learn more about this exciting idea and AMAC’s plan to guarantee Social Security for all Americans, click here.
Jeff Szymanski works in political communications at AMAC, a senior benefits organization with 2.4 million members. This piece is part of an on-going attempt to inform Americans of the reality of Social Security’s precarious financial situation and to promote AMAC’s plan to preserve and modernize the program.