Money / Social Security Planning

Social Security for Dummies

social security administration portal benefits application disability benefits pension COLA benefit militaryThe yellow “For Dummies” books were a mega sensation when they hit store shelves in the early 1990s. People loved the way complex topics and issues were explained in easy to understand English. Enter Social Security, quite the complex program, and widely misunderstood one at that.

Having taught high school economics for nearly 15 years, I was amazed at the number of my students who thought that Social Security payroll tax taken from their paychecks (FICA) was put in a safety deposit box in Washington DC with a label on the front and their name on it. Well, ok, maybe not so literally as described, but the kids did think it was their money being saved until they retired. Actually, there’s a good chance many reading this piece still think that too. My own grandparents used to think as much.

What a surprise then when people learn the money they paid in was never theirs. The program was set up in 1935 as an intergenerational transfer of funds from current workers to current retirees. True, the Social Security Administration calculates one’s monthly retirement benefit based on a formula written into law that reflects income from one’s highest 35 working years. But alas, the money one starts to receive is derived from people then working. Theoretically, this transfer payment system could go on forever, as long as people work.

In the classroom I described it simply this way: your taxes are paying for your grandparents’ benefits right now. When you retire, your kids and grandkids will be paying your benefits. This, they grasped.

The problem, and it will reach crisis stage in just over a decade, is demographic. People are living longer and thus collecting longer. The birthrate is also declining, so fewer people are starting to pay taxes relative to those collecting benefits.

In 2018, Social Security is paying out more than it collects, and this will continue. The program can sustain current benefit payments only through 2034 using the excess funds collected for decades. But, in 2034, the Social Security Trustees report all excess trust funds will be exhausted, and with a deep recession, the day of reckoning could be sooner. Across the board benefits cuts of more than 20 percent for all would then go into effect, as the program will only be able to pay out what is coming in. Needless to say, this would be a catastrophe for many seniors.

So, what to do? Chances are some seniors are now saying, “Thank God I’ll be dead by then.” Similarly, most politicians, all of whom know and understand this problem, seem to be saying this by their inaction, “Well, at least I won’t be in office then.” Naturally politicians fear retribution at the ballot box for “cutting Social Security.” But remember, the deep cuts come only if our leaders do nothing to solve the problem now.

The solutions center on these three: raise taxes, either the payroll tax rate or the amount of income taxed, or both; cut benefits; and/or raise the retirement age. But AMAC has taken a different approach, one that would address the solvency problem without raising taxes. AMAC recognizes that action must occur soon. Delay invites more difficult choices, and thus pain. AMAC’s plan entails just modest changes to the benefit formula, and these can be phased in so as not to harm the lowest income recipients who have no other source of retirement income.

AMAC recognizes the inevitability of raising the retirement age and is suggesting a gradual increase in the full retirement age, for all but those closest to it. Note the full retirement age was only increased one time in 1983, and by just two years, yet life expectancy has increased by 20 years since Social Security began in 1935.

AMAC believes in retaining the right to retire early at age 62 at a reduced rate, thus no change to current law. Part of the AMAC plan is Social Security PLUS, a voluntary companion benefit that is in addition to traditional Social Security. This will allow workers to amass wealth by age 62 to account for the fact that the full retirement age will gradually increase.

Read the Combined Social Security Guarantee and Social Security Plus Initiative here:

If You Enjoy Articles Like This - Subscribe to the AMAC Daily Newsletter!

Sign Up Today
Read more articles by Jeff Szymanski

Leave a Reply

29 Comment threads
29 Thread replies
Most reacted comment
Hottest comment thread
40 Comment authors
newest oldest most voted
Notify of
America First

If social security benefits and Medicare were paid to only those who contributed through payroll taxes, the system would be solvent longer. Visits to my local SS office as I near FRA, have revealed to me that benefits are given to anyone who claim “hardship.”
Many need a translator to help with the paperwork. Take a look at the various languages that a Medicaid statement in its mailings. I challenge those with hardships to provide tax statements that prove that they have contributed to the system.


Always about Social Security running out of money, which it isn’t. HOWEVER.COM, you NEVER hear about welfare, food stamp programs, or housing subsidies running out of money. Ever. They are fully funded via our income taxes all of the time. For people that do nothing for it. Fix that picture.

People that pay for a program won’t get the full amount promised. People that never paid into a program will keep getting their full amounts. If that isn’t buying votes and keeping people on a plantation I don’t know what is.


I am a conservative who believes that, realistically, we need to (1) balance the federal budget annually (a constitutional amendment perhaps?); (2) stop wasteful spending; (3) raise taxes incrementally–both the payroll tax rate and the amount of income taxed; (4) cut some benefits; (5) raise the retirement age to 70; (6) forbid federal government “borrowing” from (raiding?) the Social Security trust fund, and (7) privatize a program to replace Social Security entirely; (8) Stop giving out Social Security and Medicare benefits to anyone who has not paid into the system; and (9) For moral reasons alone, we need protect the lives of unborn babies which, by the way, would eventually support Social Security or a privatized retirement program.


The responsibility of much of this plan rests on the employer’s shoulders. This will not make them happy, especially with employees job-hopping as frequently as they do. The plan is in need of simplification! Raising the full retirement age, and the age of early retirement, for those not yet 50, fine. Simple. Taxing the entire income, and not just up to whatever the ceiling is, at the going rate, fine. Simple. Extending the “Now that you’re 70, you must begin collecting SS” option to, say, 75. So if you want to wait until age 75, your payment will be $XXX.00 more. Simple. Many participants will have…dropped out by then. Broadening safe investment opportunities in dedicated retirement savings plans, fine. But the employee should own all the responsibility for setting up, maintaining, and investing in his or her own future. Don’t force the burden onto businesses. I would have loved to… Read more »


Kennedy took money out of SS to fund the Peace Corps. Put it back. All money taken out to fund other programs Put it back

Pam Fennell

This would work if corporations actually hired or kept older people. My experience in the corporate world only portrayed older people being pushed out the door to be replaced by younger ones who cost less money. Age discrimination yes but all done by eliminating positions and playing games with job titles.


This dire situation was greatly worsened by Obama with his record number of people leaving the work force and his job killing policies.


Most definitely the fraud and paying out to those who are not truly in need must stop. That goes for Medicare and Medicaid; i post medical insurance payments for a doctor’s clinic and i see people receiving benefits and disability benefits for no good reason. Waste is also a huge problem in government in so many areas. Many congressmen and women are getting richer on “our backs” and the national debt is a huge disaster waiting to happen. China alone is making billions off of we the people; another swamp fraud among congress people. It needs to stop yesterday.


I think the Chileans have devised a completely better system and it is the model for the rest of the world to reform their systems. Note on whose website this link is posted from… Our current system was pushed by a socialist/communist (FDR) who wanted government dependency – and he got it.

T Krueger

The Social Security Administration announced on 8/10/18 that the maximum amount of wages in 2018 subject to the 6.2% Social Security tax will rise from $127,200 to $128,400, an increase of a little more than 1%. Why not increase it further to support the need?


I’ve said it before and I’ll say it AGAIN, Roosevelt “never” planned on FICA to go ONLY to retirees! He set it up to be a “slush fund” to pay the government expenses caused by the depression. It’s as plain as the nose on your face. If it WAS, he’d have put it in a “lockbox” so it couldn’t be used for anything else. The government just “told” everybody that to get it enacted. FICA COULD have been a good thing if it was in a locked box for retirement ONLY so they couldn’t steal the $2.6 TRILLION over the last 70 years and blow it on other things!. Every program the Democrats have started is “failing”. Medicare and the ACA are failing, yet we keep letting them come up with MORE losers. All they do is come up with “giveaways” (that can’t be paid for) so that the people… Read more »


discontinue all private pensions for govt. workers and put the money into social security!

L:en Bird

And Madoff is in jail…The government has lied to us far more than a man sitting in jail; its just that the government hasn’t been caught yet, they have our taxes to fall back on.


If SS wasn’t put in General Fund by the Democrats then we wouldn’t have a problem. What about the people that die before they draw any SS. If the Government put back what they sold then SS wouldn’t be a problem. For that matter if past, present and future Politicians were on the same system as We the People then problem sold. That’s the elephant in the room that no one wants to address.

John Voss

“The program can sustain current benefit payments only through 2034 using the excess funds collected for decades.” This is a lie. Whatever “excess funds” were collected for decades were spent on the general Federal budget as quickly as they were collected. Not only are there no individual “safety deposit boxes” for individual contributions, there is no money saved for the entire program which is a debt (unfunded liability) against the Federal budget. As the actuarial mismatch between payers and beneficiaries increases, the unfunded liability gets larger and larger. The 2034 date is arbitrary because the system could be said to be bankrupt today.


You didn’t mention the government taking huge amounts of our money, or the government granting free benefits to non citizens, or out of control fraud. Fix them, get our money back, and we’re halfway to a system that will run the way it was designed. It doesn’t matter how a politician can spin this, SS and Medicare are special taxes for special purposes. It’s our money, not the governments. We are trusting them to manage it for us. They have the best minds money can buy, so please don’t tell me they didn’t see this coming and decided to take the corrupt road.


If unemployment rates rise then we would have trouble. We must have a proper Income Tax Amendment. The current Income Tax Amendment is a blank check for the Union government because it does not have a limit. A proper Income Tax Amendment would set a cap or limit on the percentage of income tax allowed. I suggest a 25% top rate in the new Income Tax Amendment. Question: Why do we have separate rates for corporations? A lower income tax helps everyone. A lower income tax for corporations helps the large businesses to keep going and to expand and a lower income tax for individuals helps small companies to continue their existence and to become larger. Lower income tax will minimize the adverse effects of having a smaller young (working age) population.

Ron Alford

SPEAKER OF THE HOUSE- I would rather have the one President Trump wants. The one he gets along with best and will back the platform he ran his campaign on. WHO WILL RUN AGAINST TRUMP- It doesn’t matter who runs against Trump, God has already told us through one of His end-time prophets, Kim Clement before He took him home, that Trump would be His ‘Trumpet’ and His ‘wrecking Ball’. And that he would not only be elected, but also re-elected. Go to and search, kimclement/trump. CONVENTION OF STATES- With liberals like George Soros who sided with Hitler against his own people, and with his multi Billions has funded hundreds of organizations to disrupt everything good about this great country God has given us…has been trying for years to get 75% of the States to agree to a Convention of States so that he can ‘convince them’ or ‘pay… Read more »

Jeff Addiego

What a political football the politicians make this out to be!! All that is needed is to raise the cap…it’s around 120K now. Raise it or lift it entirely!!! Problem solved
Oh and keep politicians from raiding the fund like Bill Clinton and Newt Gingrich did in the 90s and then brag about balancing the budget!!

Kathy Webster

We need to make this priority. It’s our responsibility to avoid disruption for our kids and grandkids. It’s wrong to shrug off with it doesn’t affect me attitude. Make politicians do their jobs