The Social Security Solvency Dilemma: One View of a “Surefire” Fix? - The Motley Fool; AMAC
Social Security’s long-term financing woes are garnering increased attention again, with the economic devastation accompanying the COVID-19 pandemic providing more fuel to the fire. While the most recent report by the Social Security Board of Trustees reiterated the 2035 end-date for depletion of the Old-Age and Survivors Insurance and Disability Insurance (OASI and DI) Trust Funds, it also interjected a chilling summary comment that “Projections in 2020 Report Do Not Reflect the Potential Effects of the COVID-19 Pandemic.”
What effect is the COVID-19 pandemic likely to have on the projected trust fund depletion? It depends on what report you read, but the popular conclusion seems to be that the 2035 exhaustion (actually, 2034 for the OASI portion of the trust funds) of Social Security’s cash reserves could happen in the late 2020s. That’s not that far away and, as we’ve commented repeatedly on this site, the closer we get to the point of exhaustion, the more severe the remedies will need to be.
So, where are we? A number of proposed solutions are floating in the air around Washington, and the Association of Mature American Citizens (AMAC) continues to push for a bipartisan approach to ensuring Social Security’s long-term financial stability. Ideas are hitting the press with some frequency, as evidenced by this post today by The Motley Fool’s Sean Williams (click here to read his article). Williams’ premise focuses on elimination of the $137,700 payroll tax earnings cap, calling it a “surefire fix,” while acknowledging the “pushback” associated with this step and describing some of the partisan alternatives in play.
One of the bottom lines on this debate (there are several) is that while eliminating the payroll tax cap would of course bring more revenue into the system, increasing the system’s progressivity might not be the right way to go. The AMAC approach takes a different direction, tweaking the system a bit internally and giving recognition to the simple truth that the benefit eligibility age structure currently in place is not reflective of current demographics. Longevity, for example, is quite a bit different from what it was when the current ages were enacted decades ago. Another feature of the AMAC plan is the inclusion of a separate savings vehicle designed to equip future retirees with more cash at the point of retirement…an asset that would enable options for selecting when to begin drawing benefits. Learn more about the AMAC proposal by reviewing the AMAC Social Security Guarantee.