What is the goal of Social Security Reform? I mean, what is the drive to change the system? Very simply, when you cut out all of the partisan smoke and mirrors coming from both sides, the issue is ensuring that American retirees can retire to normal lives and be taken care of. This is a noble goal and was the original intent of the social security system before it got caught up in “lock boxes”, FICA taxes, employer contributions, employee contributions, minimum retirement age and “ensuring social security will be there for the next generation”.
But we are going about the whole issue from a totally “off” perspective. The assessments being made of the system and how to reform it are skewed and warped because they are viewed through the partisan haze. No one denies that social security is in trouble and will have to be addressed - whether now or later - or it will face disaster.
Paul O’neill, former treasury secretary, has a great idea and it’s one that actually makes sense. My guess is that his name has been added to a blacklist of Washington Democrats because he served under Bush and Washington Republicans because he was “fired” by Bush. So hopefully the idea can be pushed from the grassroots.
The idea is stupidly simple. From the time of birth, the federal government opens an account for a person and contributes $2000. Each year thereafter, until the child reaches the age of 18, $2000 is added to the account. Assuming a 6% interest rate, by the time an individual reaches retirement, they will have accumulated over $1 million in retirement savings. And it could not be touched until retirement age. That would provide an annual “salary” of $82,000 for 20 years and would also eliminate the need for the current social security system as well as Medicare.
Also see more comments from Byrne on the topic.
I think it’s a worthwhile approach and something that should be considered.
{ 42 comments }
Mike 03.10.05 at 7:06 am
I like the concept of starting a savings for newborns with a yearly contribution, but what about the children age 1-18? Where do they fit into this program? Will the government do catch up for them and if so where do those funds come from, or are they just out of luck? I may have missed something in the article, but I didn’t see anything that covers this question.
Aaron Brazell 03.10.05 at 7:14 am
I’m sure the initial investment would be steep but there would likely have to be an overlap between the current system and the new one - a period of time where the current system is phased out and monies contributed could be applied to the new accounts. There’s no money in the social security piggy bank anyway. That’s a farce. The government always is borrowing against it anyway.
Mike 03.10.05 at 7:24 am
Indeed… The initial investment would be staggering… True the Social Security piggy bank is empty, but the system was setup as a pay-as-you-go program. It was not setup as an insurance policy. The reason the system is about to fail is due to the falling number of current workers supporting the number of retirees. This number is only going to get worse when we have the crunch of the Baby Boomer retirees leaving the workforce. I like the concept of private accounts for younger workers, but the AARP with it’s partisan motives wants it killed. At your age I would think it would be something very favorable.
Mike 03.10.05 at 8:06 am
I like the concept of starting a savings for newborns with a yearly contribution, but what about the children age 1-18? Where do they fit into this program? Will the government do catch up for them and if so where do those funds come from, or are they just out of luck? I may have missed something in the article, but I didn't see anything that covers this question.
Aaron Brazell 03.10.05 at 8:14 am
I'm sure the initial investment would be steep but there would likely have to be an overlap between the current system and the new one - a period of time where the current system is phased out and monies contributed could be applied to the new accounts. There's no money in the social security piggy bank anyway. That's a farce. The government always is borrowing against it anyway.
Mike 03.10.05 at 8:24 am
Indeed… The initial investment would be staggering… True the Social Security piggy bank is empty, but the system was setup as a pay-as-you-go program. It was not setup as an insurance policy. The reason the system is about to fail is due to the falling number of current workers supporting the number of retirees. This number is only going to get worse when we have the crunch of the Baby Boomer retirees leaving the workforce. I like the concept of private accounts for younger workers, but the AARP with it's partisan motives wants it killed. At your age I would think it would be something very favorable.
Mike 03.10.05 at 10:32 am
New posting at Bark at the Moon with questions regarding Paul O’neill’s proposal for turning babies into millionaires… Where will these funds come from?
Mike 03.10.05 at 11:32 am
New posting at Bark at the Moon with questions regarding Paul O'neill's proposal for turning babies into millionaires… Where will these funds come from?
Aaron Brazell 03.10.05 at 2:04 pm
Well that’s fine, Mike, but you’ve given us no link… ;) I’ll teach you how to do this blogging thing yet!
Mike 03.10.05 at 2:42 pm
Aaron if you click on my name you will be linked to my blog ;)
Aaron Brazell 03.10.05 at 3:04 pm
Well that's fine, Mike, but you've given us no link… ;) I'll teach you how to do this blogging thing yet!
Aaron Brazell 03.10.05 at 3:05 pm
Yeah but what about the readers 6 months from now who click on your name and your entry is 6 months down the tracks and cannot quickly locate the entry. A link to the specific entry you are referring to would be helpful. :)
Mike 03.10.05 at 3:42 pm
Aaron if you click on my name you will be linked to my blog ;)
Mike 03.10.05 at 3:42 pm
Ok… I see your point…
Here’s the link…
http://barkatthemoon.myblogsite.com/blog/_archives/2005/3/10/414509.html
Aaron Brazell 03.10.05 at 4:05 pm
Yeah but what about the readers 6 months from now who click on your name and your entry is 6 months down the tracks and cannot quickly locate the entry. A link to the specific entry you are referring to would be helpful. :)
Mike 03.10.05 at 4:42 pm
Ok… I see your point…
Here's the link…
http://barkatthemoon.myblogsite.com/blog/_archi...
Aaron Brazell 03.10.05 at 5:40 pm
I guess the thought is that the government will “budget” money to be contributed through age 18. They already do this (theoretically) for social security by paying out to retirees in monthly checks. So the idea would be that the government takes what they are paying out “on faith” now (because it really isn’t actually there) and pay into individual retirement accounts until the child reaches adulthood and becomes a contributing member of society. Then the government contributions end. Period. End of story. The funds built up in this private account cannot be touched by anyone, including the recipient, until retirement age (theoretically 65).
If left to itself, the “pot” will be well over a million dollars after accruing interest for the 65 year life of the account.
If the retiree wants to secure their financial well being in retirement, they can always contribute to 401k programs or IRAs that are available through most employers and financial institutions. In this way, they can take posession of their future and actually put away WAY more than the government will “give” them (which is only $36,000 ($2000/yr * 18 years) - all else is interest on a stable mutual fund or money market or other investment fund).
So though the prospect would be expensive at first, it could be staggered… how many 0-18 year olds are retiring in the next few years??? I can’t imagine it would cost more than the $2 TRILLION is feasible under current suggestions.
Mike 03.10.05 at 6:19 pm
TThe question isn’t how many 18 year olds are retiring in the next few years, that’s irrelevant… If the government were to begin such a program they would have grand-father all the children between the ages of 1-18 years old, or are they left out? How many children are there in that age group? What would that cost amount to? Staggering…. Don’t get me wrong I think the concept is good and most people are not able to put away $2000 for each child per year… I do think this is unrealistic though… It is better to fix what we have now and allow younger workers the opportunity to control at least a part of their Social Security investments through private accounts, which would pass onto survivors. Also, if the government would be paying out $2000 per year for every child up until they reach 18 where do these funds come from? The government will also be paying out to current retirees and that number will continue to grow every year. The average worker in this country will end up paying for the 1-18 year olds investment accounts and the people already retired. There just are not enough workers to cover the number of people already retired and the coming Baby Boomers who are already beginning to retire…
Aaron Brazell 03.10.05 at 6:40 pm
I guess the thought is that the government will “budget” money to be contributed through age 18. They already do this (theoretically) for social security by paying out to retirees in monthly checks. So the idea would be that the government takes what they are paying out “on faith” now (because it really isn't actually there) and pay into individual retirement accounts until the child reaches adulthood and becomes a contributing member of society. Then the government contributions end. Period. End of story. The funds built up in this private account cannot be touched by anyone, including the recipient, until retirement age (theoretically 65).
If left to itself, the “pot” will be well over a million dollars after accruing interest for the 65 year life of the account.
If the retiree wants to secure their financial well being in retirement, they can always contribute to 401k programs or IRAs that are available through most employers and financial institutions. In this way, they can take posession of their future and actually put away WAY more than the government will “give” them (which is only $36,000 ($2000/yr * 18 years) - all else is interest on a stable mutual fund or money market or other investment fund).
So though the prospect would be expensive at first, it could be staggered… how many 0-18 year olds are retiring in the next few years??? I can't imagine it would cost more than the $2 TRILLION is feasible under current suggestions.
Vinnie Garcia 03.10.05 at 6:47 pm
$82,000 doesn’t seem like it will be much of an income in 65 years. Then again, Social Security was never really meant as a full retirement plan, so it might work. However, I don’t see how it will help those inbetweeners like me, who won’t get much if anything out of the current system and aren’t lucky enough to have been born 25-30 years in the future.
Mike 03.10.05 at 7:19 pm
TThe question isn't how many 18 year olds are retiring in the next few years, that’s irrelevant… If the government were to begin such a program they would have grand-father all the children between the ages of 1-18 years old, or are they left out? How many children are there in that age group? What would that cost amount to? Staggering…. Don't get me wrong I think the concept is good and most people are not able to put away $2000 for each child per year… I do think this is unrealistic though… It is better to fix what we have now and allow younger workers the opportunity to control at least a part of their Social Security investments through private accounts, which would pass onto survivors. Also, if the government would be paying out $2000 per year for every child up until they reach 18 where do these funds come from? The government will also be paying out to current retirees and that number will continue to grow every year. The average worker in this country will end up paying for the 1-18 year olds investment accounts and the people already retired. There just are not enough workers to cover the number of people already retired and the coming Baby Boomers who are already beginning to retire…
Vinnie Garcia 03.10.05 at 7:47 pm
$82,000 doesn't seem like it will be much of an income in 65 years. Then again, Social Security was never really meant as a full retirement plan, so it might work. However, I don't see how it will help those inbetweeners like me, who won't get much if anything out of the current system and aren't lucky enough to have been born 25-30 years in the future.
Aaron Brazell 03.10.05 at 8:33 pm
$82000 accruing 6% interest over 65 years is well over a million dollars, Vinnie. And Mike, you have a point. But the idea still deserves some consideration and maybe the numbers brains in Washington can figure out how to make it happen without bankrupting the system perhaps…
Aaron Brazell 03.10.05 at 9:33 pm
$82000 accruing 6% interest over 65 years is well over a million dollars, Vinnie. And Mike, you have a point. But the idea still deserves some consideration and maybe the numbers brains in Washington can figure out how to make it happen without bankrupting the system perhaps…
Vinnie Garcia 03.11.05 at 9:05 am
I thought $82000 was the annual payments sent out upon retirement. In the year 2070 I don’t think that will be much money at all, maybe enough to keep the elderly from having absolutely no money, but it definitely won’t be enough to retire on alone. It’s not that I expect Social Security to be set up as one’s only source of retirement; I just don’t necessarily think this approach will be the boon everyone’s making it out to be. Think of how far even $5 would have gotten you back in 1940 versus today.
Vinnie Garcia 03.11.05 at 10:05 am
I thought $82000 was the annual payments sent out upon retirement. In the year 2070 I don't think that will be much money at all, maybe enough to keep the elderly from having absolutely no money, but it definitely won't be enough to retire on alone. It's not that I expect Social Security to be set up as one's only source of retirement; I just don't necessarily think this approach will be the boon everyone's making it out to be. Think of how far even $5 would have gotten you back in 1940 versus today.
Aaron Brazell 03.11.05 at 10:59 am
Actually, Vinnie, you have a point. I wasn’t thinking there.
That said, I think it will be a very long time before $82k is not enough for a retiree to live on.
Aaron Brazell 03.11.05 at 11:59 am
Actually, Vinnie, you have a point. I wasn't thinking there.
That said, I think it will be a very long time before $82k is not enough for a retiree to live on.
Vinnie Garcia 03.11.05 at 1:11 pm
That’s true. My wife and I are doing okay in a pretty expensive city with quite a bit less than that :). I think right now the average retiree gets about $24K/year from SS. I get the feeling that by the year 2070, $82K/year will be about the same, purchasing-power wise, as the $24K today, if not less.
Aaron Brazell 03.11.05 at 1:14 pm
And $82k is just for one individual. If there are two retirees, then that would be $164k…
Vinnie Garcia 03.11.05 at 2:11 pm
That's true. My wife and I are doing okay in a pretty expensive city with quite a bit less than that :). I think right now the average retiree gets about $24K/year from SS. I get the feeling that by the year 2070, $82K/year will be about the same, purchasing-power wise, as the $24K today, if not less.
Aaron Brazell 03.11.05 at 2:14 pm
And $82k is just for one individual. If there are two retirees, then that would be $164k…
psychophil 03.12.05 at 2:35 am
1- $85k is going to be chump change in 60 years. How much did an automobile cost 60 years ago? How much did a house?
2- Where is the money going to come from? The government doesn’t generate money, it takes it from taxpayers. This is nothing but yet ANOTHER government spending program which creates the need for even more taxes. The funds in a truely private account are generated by the owner of the accounts.
3- What happens to the money if you happen to die early? Whith the current SS system it all goes back to the government. Sure, your family gets $250 to help buy a $3500 coffin, but other than that, buh-bye. In a truely private account, you generate the money, your heirs keep the money.
4- If anyone is truely depending on the government and social security to completely provide for their retirement, they are an idiot.
5- This plan doesn’t do dick for me. I want full control of my money and my retirement NOW.
psychophil 03.12.05 at 3:35 am
1- $85k is going to be chump change in 60 years. How much did an automobile cost 60 years ago? How much did a house?
2- Where is the money going to come from? The government doesn't generate money, it takes it from taxpayers. This is nothing but yet ANOTHER government spending program which creates the need for even more taxes. The funds in a truely private account are generated by the owner of the accounts.
3- What happens to the money if you happen to die early? Whith the current SS system it all goes back to the government. Sure, your family gets $250 to help buy a $3500 coffin, but other than that, buh-bye. In a truely private account, you generate the money, your heirs keep the money.
4- If anyone is truely depending on the government and social security to completely provide for their retirement, they are an idiot.
5- This plan doesn't do dick for me. I want full control of my money and my retirement NOW.
Aaron Brazell 03.12.05 at 10:13 am
Cool down, guys. The idea was a conceptual one and no doubt it would be necessary to work out all the nitty gritty and no doubt compromise would have to come into play. But then again, that’s going to have to bet the case for any solution.
Aaron Brazell 03.12.05 at 11:13 am
Cool down, guys. The idea was a conceptual one and no doubt it would be necessary to work out all the nitty gritty and no doubt compromise would have to come into play. But then again, that's going to have to bet the case for any solution.
kstreetfriend 03.23.05 at 1:12 am
Mayflower Compact Coalition (Wangstas Fo’ Shizzle My Nizzle)…
RNC Chairman Ken Mehlman today attended the unveiling of the 21st Century Mayflower Compact at the Mayflower Hotel in Washington D.C.. The nine-point agenda includes support for school choice and private social security accounts. The Coalition is advised in part by former House Speaker Newt Gingrich’s consulting firm.
African Americans often reach different and surprising conclusions on social issues that the casual (Caucasian) observer just won’t understand. For example, Black folks still want to see Michael Jackson find happiness. His high-pitched voice and soulful delivery is the soundtrack of generations and has a permanent place in the Black community’s psyche, no matter the plastic surgery, skin bleaching and alleged child molestation charges. Possibly, it’s the “he’s still Black
kstreetfriend 03.23.05 at 2:12 am
Mayflower Compact Coalition (Wangstas Fo' Shizzle My Nizzle)…
RNC Chairman Ken Mehlman today attended the unveiling of the 21st Century Mayflower Compact at the Mayflower Hotel in Washington D.C.. The nine-point agenda includes support for school choice and private social security accounts. The Coalition is advised in part by former House Speaker Newt Gingrich’s consulting firm.
African Americans often reach different and surprising conclusions on social issues that the casual (Caucasian) observer just won’t understand. For example, Black folks still want to see Michael Jackson find happiness. His high-pitched voice and soulful delivery is the soundtrack of generations and has a permanent place in the Black community’s psyche, no matter the plastic surgery, skin bleaching and alleged child molestation charges. Possibly, it’s the “he’s still Black
David Nick 03.23.05 at 2:46 pm
Does this last post constitute spam? LOL
Aaron Brazell 03.23.05 at 3:09 pm
Nah. It’s a Pingback from his blog. It’s okay. :)
David Nick 03.23.05 at 3:46 pm
Does this last post constitute spam? LOL
Aaron Brazell 03.23.05 at 4:09 pm
Nah. It's a Pingback from his blog. It's okay. :)
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