Social Security’s Problematic Trifecta - AMAC Foundation & The Motley Fool

Let’s start with an understatement: the COVID-19 pandemic is wreaking havoc on the nation’s economy. The projections dealing with unemployment, corporate earnings, small business continuity, etc. are horrendous, both short-term and long-term. We see alerts every day telling us how bad it is, how it may worsen in the months ahead, and how the likelihood of a recession is developing. The facts are clear…it’s a very real problem.

And here’s another very real problem: Social Security is facing its own set of somber projections, with the ultimate nightmare being the full depletion of its cash reserves. The most recent Social Security Trustees Report suggested that the combined asset reserves of the Old-Age and Survivors Insurance and Disability Insurance (OASI and DI) Trust Funds would be exhausted by 2035, and that incoming revenue at that point would only provide for payment of 79% of promised benefits. Most importantly, though, the press release accompanying the Trustees Report contained this disclaimer, “Projections in 2020 Report Do Not Reflect the Potential Effects of the COVID-19 Pandemic.”

These effects are dire (another understatement). With unemployment comes a substantial drop in Social Security’s primary revenue source–payroll taxes. Couple that with the potential for what legislators are calling a “payroll tax holiday” that would completely negate this income stream, and then reflect on the Federal Reserve’s dramatic reduction in interest rates and the impact these new rates have on the Social Security Trust Fund’s investments. What you have, then, bodes poorly for Social Security in the years ahead, with the looming possibility that the 2035 Trust Fund depletion projection could be brought forward, perhaps as much as five or six years.

The Motley Fool’s Dan Caplinger, in a post on their website, helps sound the alarm on this issue. Read his article here. As Caplinger points out, “the best defense against Social Security’s problems is to ensure you have financial resources of your own to draw from when you retire.” Given this advice, it’s important to note that the Association of Mature American Citizens (AMAC) Social Security Guarantee–a legislative framework developed to preserve and modernize Social Security without raising taxes–contains a provision (Social Security Plus) designed to address this specific issue. Read the AMAC proposal here…


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