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
The promise to guarantee Social Security for all Americans must be kept. AMAC has examined the many proposed solutions presented in the intermediate assumptions portion of the 2016 Trustees Report and selected the alternatives we feel are best-suited to save Social Security. We have combined these selected assumptions with several other recommendations to achieve what is the best path to long-term Trust Fund solvency without raising taxes.
AMAC’s proposal has three Prime Directives:
- Increase benefits for those with lower earnings
- Achieve solvency and ensure benefits continue
- Provide a means for all earners to have more income available at retirement
We believe this proposal presented here succeeds in achieving all of these directives.
I. INCREASE BENEFITS FOR THOSE WITH LOWER EARNINGS
Implement a tiered approach to the calculation of Cost-of-Living Adjustments (COLA) as follows:
- For Beneficiaries with a household income (AGI) level less than $20,000, set an annual COLA range of 3% minimum – 4% maximum.
- For Beneficiaries with a household income (AGI) between $20,000 and $50,000 set an annual COLA range of 1.5% minimum – 3% maximum.
- For Beneficiaries with a household income (AGI) of $50,001 or higher, set an annual COLA range of 1% minimum – 2% maximum.
Note: In 2009, 2010, and 2016, there was no Social Security COLA, despite the fact that expenses most common to seniors (e.g., food, insurance, medical treatment, prescription drugs, etc.) continued to rise sharply. Under this plan, all retirees will be guaranteed an increase each year. 1
1. Medicare increases could offset the guaranteed COLA.
II. ACHIEVE SOCIAL SECURITY TRUST FUND SOLVENCY
- Implement a setback in the retirement age for new retirees:
- Early retirement age should remain at 62. The percentage of benefit reduction for early retirement would remain as determined by the Social Security Administration (e.g., a range of 20% to 30%, depending on normal retirement age).
- After the normal retirement age (NRA) reaches 67 for those attaining age 62 in 2022, increase the NRA by 2 months per year until the NRA reaches age 69 for those attaining age 62 in 2034. Thereafter, increase the NRA in a manner that will keep the ratio of (life expectancy at NRA)/(NRA-20) constant. This is likely to result in an expected increase in the NRA of 1 month every 2 years. Additionally, increase the age up to which delayed retirement credits may be earned, on the same schedule (3 years past the NRA).
(Source: Table A, Section 4 – 7/13/2016 Office of the Chief Actuary letter to Rep. Ribble, H.R. 5747 sponsor)
- Change the level of payments for future retirees starting in 2022
- Adjust the Primary Insurance Amount (PIA), keeping lower income earners benefits the same and lowering benefits for higher income earners.
- Progressive price indexing (50th percentile) of PIA factors beginning with individuals newly eligible for OASDI benefits in 2023:
- 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 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.
(Source: Level of Monthly Benefits Summary [2016 Trustees Report intermediate assumptions], item B1.4)
- For the OASI and DI computation of the PIA, gradually reduce the maximum number of drop-out years from 5 to 0, phased in over the years 2018-2026.
(Source: Level of Monthly Benefits Summary [2016 Trustees Report intermediate assumptions], item B4.3)
- Bipartisan Policy Center’s Commission on Retirement Security and Personal Savings Plan—Enhance Survivors Benefits: Beginning for newly eligible retired workers and spouses in 2022, all claimants who are married would receive a specified joint-and-survivor annuity benefit (i.e., surviving spouses would receive 75 percent of the decedents’ benefits, in addition to their own) that would be payable if both were still alive. Initial benefits would be actuarially adjusted to keep the expected value of benefits equivalent to what would otherwise be current law (i.e., with the other provisions of this package incorporated).
(Note: Under this calculation, surviving spouses would receive a significantly higher benefit)
(Source: Table A, 6/9/2016 Office of the Chief Actuary letter to Messrs. Conrad and Lockhart, Co-Chairs).
The AMAC Social Security Guarantee prototype plan combines the provisions shown above, and includes the addition of a new benefit that we feel Social Security must include if it is to help and encourage workers to secure a sufficient retirement.
III. PROVIDE A MEANS FOR ALL EARNERS TO HAVE MORE INCOME AVAILABLE AT RETIREMENT
- Early Retirement Account (ERA) a voluntary companion benefit
- Provide access to ERA funds at age 62
- Provide additional funds for retirement for all workers
The Early Retirement Account (ERA)
- Voluntaryaccount for both employee and employer
- Tax deduction for employer, after-tax for employee with income sheltered
- Employee not taxed on receiving funds (similar to a Roth IRA)
- 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
- Portability, if wage earner changes jobs, the new employer must add payroll access for ERA
- Funds 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
- Early Retirement Account benefits, including earnings, are tax-free
- 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
Why a new Early Retirement Account?
Fifty million Americans have no retirement plan, and the average person receiving retirement benefits collects slightly more than $16,000 per year. Accordingly, 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.
|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* Historical average returns
- 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.
It is estimated the average wage earner will accumulate between $250,000 and $500,000 at the time they claim the benefit because workers increase their contributions as they become older and as wage levels are likely to increase.
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; specifically, the Long-range actuarial balance is expected to be -2.66 and the 75th year annual balance is projected at -4.35.
The AMAC proposal incorporates the 3 provisions discussed above, all of which have been scored by the Office of the Chief Actuary. Each improves one or both of the actuarial balances so that the total effect appears to meet the goal of achieving positive balances (See chart in Exhibit A).
It must be understood that because of the interaction of the changes on each other, 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 result from these changes.
For additional information contact:
President, AMAC 312 Teague Trail, Lady Lake, FL, 32159 | 888-262-2006
Parker Erickson firstname.lastname@example.org
The Charles Group, 322 Massachusetts Ave. NE Washington, DC 20002
These changes will assure the continuation of Social Security benefits for future generations of Americans.
The Social Security Report – Powered by the AMAC Foundation
One of the Foundation’s key services is the maintenance of a website focused exclusively on Social Security and its many issues. AMAC’s Social Security Report website (socialsecurityreport.org) is a resource for anyone interested in the state of our country’s Social Security program, and includes these features:
- Daily newsfeeds on major breaking news and legislative developments affecting Social Security
- Questions and answers relevant to topics of interest to the public
- A “toolkit” of resources site visitors can use in decision-making
- An archive of documents on key Social Security issues
- A link to AMAC’s proposal for prototype Social Security legislation
Designed originally as a service to Congressional Aides and their Senators and Representatives to stay abreast of developments and projections on Social Security and its related programs, the site has evolved to be much more than that. Its content, and its attention to breaking news, have made it a ready source of facts, figures, and statistics on a wide variety of Social Security-related topics.