Finance / 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:

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rexford O Ames
3 years ago

This issue has gotten so convoluted. It would take an expert to digest for years. The truth is kept from being told. I keep getting : Notices from Politicians that want to help with Medicare and Social Security , for years. Same rhetoric. Same issues, Year after Year.
Having said that. The TRUTH be told. They are not going to change their open pocket’s, when it comes to : Social Insecurity. It will remain the same because, why mess with a bank they have all the money they could want and never be held accountable for. Point, Pelosi and Company passed a bill worth 2.2 Trillion dollars. It amazes me that Congress can make money out of nothing, and continue doing so , because they can. Thanks to the FED who has been run, by the American Banking Industry ever sense, 1919. If you still think the FED is part of the Federal Government. You still live in La La land.
If you think the Democrat Party is : Democrat? You live in La La Land. That includes the Republican party as well. Do you Remember the ” Tea Party” The Party that was put together buy everyday citizens and was making ,strong head way , in the changes this country begged for. Who do you think Sicked the IRS on them and destroyed the very foundation of that Party. The Democrats, Oh Yea , along with the Republicans. the Tea Party scared the hell out of both parties. What , account ability, Term Limits, Are you Kidding yourself. Those Public made Millionaires, change. Yea, Right. Do you really think that the 5 top Democrats, that violated every law they could to destroy our country, and the President , we the people placed into office, will be held accountable for there actions in a court of law? You do. Really!
How convenient this Virus just happen to pop up, right after the Impeachment Process failed? They are still there, not helping us however, helping themselves with impunity , because we are concentrating on this ” NEW ” Virus. Thank you so much Democrats and CHINA.

Brenda Qualls
3 years ago

The money DOES belong to Americans who have paid into Social security over the course of their lives. Congress raided the so-called “locked box.”
I know some people call it an entitlement benefit. It’s NOT. People already paid for it.

Grace Hensley
4 years ago

I’m guessing this is why it jas already been over 180 days since my hearing and I still havent heard anything yet. I have worked since I was 50 and can’t work anymore. I have paid in all those years…why is getting a decision taking so long?

Joe Commonman
4 years ago

We really need an increase to the income limit – I pay social security taxes on 100% of my income….why shouldn’t Tiger Woods, etc. pay Social Security on 100% of their income.

4 years ago

great article!

JB Gold
4 years ago

I propose we raise the Social security age from 62 to, say, 70. No reason folks should not work longer, right?

2 years ago
Reply to  JB Gold

Look at Biden @ age 78 years old – he definitely should not be working.

JB Gold
4 years ago

You want to increase the normal retirement age (NRA) in accordance with Life Expectancy? So does your plan include *decreasing* NRA when Life expectancy drops (as it just did these last couple years due to increasing societal Despair? See ) .

JB Gold
4 years ago

Raise the retirement age, Jeff? No way! Not with increasing age discrimination and outsourcing and automation that reduce American jobs in the first place. The solution is clear: increase the maximum income that is taxed for SS from approx $130k annually to as high as needs to be to fully fund it. This can be done annually. And encourage greater legal immigration to offset fewer workers due to diminished birth rate.

4 years ago

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.

John Voss
4 years ago

“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.

4 years ago

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

4 years ago

The average government worker (not Congress) pays into their own pensions.

K Dean
4 years ago

Privatize social security. Keep the present system for those currently collecting, and for those who are going to retire in the next 10 years, while switching to a private system where the younger ones have a retirement savings account with their name on it – to be given to survivors if they pass away before they can collect. The younger ones will fare much better. The older ones will still get the money they paid in. Love him or hate him; George Bush tried to pass a similar bill and he got lambasted for it. You know – the democrats were crying that he was throwing grandma over a cliff!

John Grubb
2 years ago
Reply to  K Dean

I Think that’s called a 401K.

L:en Bird
4 years ago

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.

4 years ago
Reply to  L:en Bird

They’ve been caught but they won’t throw themselves in jail. They need to be ‘booted out’ but people keep voting them back in. I think term limits would help substantially, but I don’t think the politicians will ever let that happen.

Pam Fennell
4 years ago

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.

3 years ago
Reply to  Pam Fennell

True, second time job titles have come into play from my company, each time rights are lost and benefits affected! Pensions are made weaker for those who are vested and committed to stay cause of retirement within 5-10 years. Newer employees hopping from job to job because reduced plans won’t hurt them now, but hurts the employee who paid to hire them initially. Bias in work place cause your not retiring at 66 and harassment for older workers to retire by co-workers, older workers don’t want to retire with so much chaos in economy going on, if working keeps them in their current life mode it’s best to continue based on all the SS plan issues and giveaways! What is retirement anyway?

4 years ago

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

Irv C
4 years ago

You say there’s less people working? The population has gone up dramatically and it’s not that people are born and instantly 62 plus. Point is there’s MORE paying in than beforeso someone (our government) is as usual, full of Sh..
Perhaps do t give SS or Disablity to ANYONE who hasn’t worked. Excluding of course severe disability as I see so many who are very healthy yet draw SSI. They learn how to beat the system. This is just my opinion because I will be 66 in March and am in my 51st year of working. My retirement went with my divorce 18 years ago so I’ll rely totally on SS. Why not? If Uncle Sham wants he can pay me all I and my employer paid in lump sum with interest and I’ll happily go off grid.

4 years ago

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.

4 years ago

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 will keep voting them in.

4 years ago
Reply to  Stahu

And if we don’t get out and vote, the Democrats will have us in pure Socialism very soon!!!

4 years ago
Reply to  Mary

Socialism is not sustainable. Demoncrats talk about sustainability but know nothing about it.

Ron Alford
4 years ago

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 them off’ what ever works; so they can change the U.S. Constitution to what they want it to be. We all need to pray very hard that God through Jesus Christ, His Son will grant us the power to stop them with the power He grants us.

Jeff Addiego
4 years ago

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!!

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