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Ask most Americans if Social Security benefits will be there for them when they retire and many respond unsure. As the federal government struggles to pay run-away entitlement costs, it’s clear the system is unsustainable. Yet Americans need and want retirement assistance so what can be done to solve the problem? The answer is much simpler than you might think.
Under the Social Security benefits program, the original system set up a trust fund account so that as workers and employers paid into the system, the mounting balance could grow through investment annuities and thus ensure the fund could last without additional aid from the federal government. However, over the decades, each party has considered the funding going into the trust fund a free-for-all loan and spending program that has essentially depleted the trust fund and left the federal government scrambling to pay for the program in real time. In other words, while the program meant well and may have continued to work well, politicians and judges ruined it by allowing the government to stick its hand in the cookie jar—an act that would have sent them all to prison had it been a private pension fund instead. And now millions of seniors and future seniors are worried they will not have the supplemental benefits they need to survive.
To solve the problem of social security trust fund insolvency, a two step solution must be installed that will not ill-impact current or near future social security recipients yet will solve the problem for future generations–all while providing even more retirement benefits for many.
Citizen America calls this two step solution the Social Security Reform Act of 2016. Here is how it would work:
Part I – Freedom Accounts
- Starting immediately, every US citizen and legal immigrant can set-up a Freedom Account (so named because it implies freedom from government intrusion).
- A Freedom Account (FA) allows the individual to transfer up to 35% of their earnings per year (not exceeding an average of 20% per year over 5-years) on a 100% tax free basis.
- The FA is 100% secure and protected from all forms of lawsuit or government attachments, including government confiscation for tax debts, fines and other purposes.
- The initial fund will limit each account to a maximum balance of $6 million, after which no more principle or interest can be added to the fund.
- The maximum limit of the account shall be raised each year based on the official cost-of-living inflation factor set forth by the federal government.
- Funds from the Freedom Account can be withdrawn based on a 20-year withdrawal plan that exempts the income from any and all taxes. Faster (larger) withdrawal rates are taxed on the amount that exceeds the 20-year withdrawal rate plan to discourage early depletion of the fund). Persons suffering catastrophic health issues can receive waivers via the certification from three of their own physicians.
- Any IRA or 401K or other retirement funds currently owned by the individual can be transferred into the Freedom Account tax free and employers can contribute as they might to such individual employees using this (job mobile) retirement investment program instead.
- The money can be invested in any form of investment, including real estate, precious metals, investment grade jewels, bonds, and other low or medium low risk investments.
- To prevent unsafe gambling with such retirement accounts, certain high-risk investments are prohibited and listed on the Freedom Account Risk & Protection Regulation sheet provided by a quasi-government entity of both private and government personnel–an organization set-up to ensure program integrity and safety (Freedom Account Risk & Protection Organization). Prohibited investments are listed and designed to protect individuals from engaging in unhealthy risks.
- The regulators goals are to ensure program integrity and that retirement accounts are not unduly compromised. Hence they can limit certain types of investments and fund percentages for such uses. The group must consist of the nation’s top conservative investment risk managers. Congress may review their track record and make changes to the organization and policies as deemed needed to ensure program integrity.
- A 2/3 vote in both houses is needed to alter the program once set in place and such changes shall only apply to new program entrants, not existing ones (unless the individual waives, in writing, his or her rights to the grandfather program in favor of the changes / new program).
The point of the Freedom Account program is to ensure individuals can ensure their own retirement income safely and without the need for, or threat of, any government intervention or confiscation. The government and public or private entities give up the right to confiscate such funds in all cases in exchange for being set free from the costs and burdens of the Social Security program in the future. Ensuring the fund can never be tapped into or destroyed by the government, etc. ensures confidence and integrity into the system itself.
The Freedom Account program realizes that some professions and jobs can be cyclical in nature, allowing low investment to the program in some years and higher amounts in other years. Thus the program uses a 5-year contribution average that allows higher contributions in “fat” years and lower contributions in “slim” years for personal earnings without forcing penalties.
Part II – Social Security Phase Out
- Persons under the age of 30 years old when the program is enacted will no longer be eligible for Social Security benefits. Such persons must rely on the Freedom Account instead.
- Persons over the age of 30 years old when the program is enacted will continue to receive Social Security benefits per the current program.
- Persons over the age of 30 years old when the program is enacted will also fall into the Freedom Account savings era and will be encouraged to contribute to their account balances. Upon retirement, this group will have their Social Security monthly benefit payments reduced by $1 for every $2 per month income they receive from their Freedom Account post retirement.
Persons over the age of 30-years old are already entrenched into the Social Security system and have paid into the system enough that they should not be removed from the program. Persons under the age of 30-years old have generally not contributed so much to the program that they cannot make it up by using a Freedom Account instead. As a compromise, the government can aid the under 30-age group by tabulating what they have paid into the Social Security program thus far and then install that amount into the individual’s personal Freedom Account.
It will take about 40-years or so until the entire Social Security program can be officially shut down and the costs removed from the federal government budgets. However, the issue of Disability benefits will still need to be administered by Social Security so the agency itself will not be dismantled but will be greatly reduced in size and costs overall.
Freedom Accounts will allow individuals to build up their retirement accounts quickly and will encourage savings and over-all national security through the collective wealth of the nation. FA account holders will also be able to dramatically raise their monthly income payments at retirement because the government will no longer be able to steal funds for other uses–the funds will instead be left to grow over time.
While the Freedom accounts are better than Social Security accounts, they will not solve every retirement or social problem. Some low income workers will fall through the cracks so the government will have to provide social programs to counter this aspect. One way to do it is that the federal government can contribute to low income Freedom Accounts based on a sliding scale need basis, thus avoiding the need to create social programs and administrations accordingly.
The federal government will have to endure about 10-years of higher costs due to lower tax collections coming into the system (due to Freedom Account contributions) but as people begin to retire who have such accounts and offsets, the Social Security payouts will be lower and will eventually zero out—the savings to the federal government will exceed over $100 trillion over this century alone.
BILL PROPOSAL STATS
- Original Sponsor: Citizen America
- Freedom Account Program Creator: Xelan Bonn
- Status: Not Yet Sponsored In Congress