Here is my long term plan to replace Social Security.
Understand this is a long and drawn out process. It is not an immediate fix.
Start immediately. The government creates special retirement accounts that can never be touched until retirement age, no borrowing against it. Put $10k into every new born baby’s accounts. Then every single year put an additional $1k into those accounts. After 65 years at an average of 7% interest earned then the accounts would be worth roughly 2 million dollars. If the interest is higher then the amount will be higher. At the end of the 65 years the government would take back the $75k that was invested to be reused for future kids. If the person passes away at any time during those 65 years the family gets to keep all the interest that had occurred and the government would take back whatever they put into it. So it could be a small safety net as well for families.
Now what is the cost? Right now social security is around 1.5 trillion per year. There is about 3.6 million babies born every year. At $10k per baby that equals 36 billion a year. There is about 281 million American citizens below 65. At $1k each year it would be around 281 billion. So a combined average of around $317 billion compared to 1.5 trillion, plus whatever is invested the government gets back to be used again later. Obviously the amount deposited each year would have to go up with inflation, but again all of it is given back after the person turns 65 or passes away.
This would save us 1.2 trillion a year long term. I know with inflation that number would rise, but not to much because we would recycling the money after a while.
Also we would create annuities for everyone after 65. If they get a guaranteed 4.5% interest rate, with 2.5% to live off and 2% to continue to grow the account to keep up with inflation. The money would never run out and could be passed down. 2.5% of $2 million is $50k per year, but with the 2% increase it would go up each year. That is $4,166/month. The current average is $2k per month with a max of $5,100/ month.
This would all be tax free as well.
Also people can still add money to the account every year or start their own 401k or Roth.
You have put a lot of thought into this and I kind of like the concept. But being the pessimism I am since this has to be created by Congress, what stops a future Congress from changing the rules?
Maybe putting a capital gains tax on the money, or changing the rules so they can use the money somewhere else like they did with the current system.
Remember, the people who make the rules can change them any time they want.
Maybe add a stipulation to change this system so that it need to be voted on by every state (state elections by citizens, not Congress members) and you need 2/3rds of the states to approve the change.
Anything to keep 1070 hands out of it. (535 in Congress x 2)
Did I miss it? What does your plan do about the ~75 million people who are currently drawing SS benefits? (And, BTW, why is roughly a fifth of the country drawing them?) Would their benefits continue?
Are funds deposited by the govt invested in the market? Where does the interest come from if they are left in govt hands?
What is to keep congress’ hands off the funds and the program? This would have to be embedded in law so deeply that it would take the same kind of political pressure to change that a constitutional amendment does.
Your plan doesn’t address what I deem to be the biggest problem with SS: who is entitled to benefit? IMO, one who paid the maximum into the plan for 40 years, there are too many drawing benefits who paid too little into the program. Something MUST be done to stop politicians from buying votes by making benefits more easily obtained.
Finally, as it stands today, there is too little incentive for Americans to finance their own retirement. The current system is more like a ponzi scheme than a valid pension plan. Why not allow citizens who qualify (and ONLY citizens should be allowed in the program) to contribute untaxed funds into their own plans? (presuming that the funds do not go into govt coffers but go into private sector managed programs)
Interesting concept. As long as we can keep Congress’ hands out of the pot, I believe it can work.
Trusting Voters to vote in their own best interest is a gamble as most Voters are uneducated. For example, look at how many Voters voted in favor of Eminent Domain.
There has to be an ironclad clause included to keep Congress’ hands out of the pot and not trusting/requiring a Vote from ignorant Voters.
The Gov was never supposed to touch Social Security when it was first established! But greedy politician’s just couldn’t keep their filthy hands off of it. So now they keep saying it’s going broke! Well maybe we should stop giving our money to the dead and illegals first. There would be plenty if this just stopped!