Proposed Social Security Plan

Overview

Right Tool for the Right Job - Social Security was originally designed to be an insurance policy against poverty in retirement. It has, for better or worse, evolved into the primary retirement income for most retirees. We must change the tool to better fit the job.

Transparency – Our government needs to be transparent. There is no Social Security bank account and the money we have been promised has been spent.

Mandatory Retirement Accounts - We must get the Federal Government out of the investment banking business by slowly eliminating the current system. This will be done by slowly converting people to Mandatory Retirement Accounts (MRA).

American’s Investing in America – MRA’s will primarily be invested in Municipal Bonds and U.S. Treasuries which will keep the risk very low, while supporting the liquidity of the US economy.

Options for Each Generation – There will be different options for every age bracket that will allow them the best opportunity to have a financially secure retirement.

Retirement Moves to 67 - The age for Social Security benefits to begin will be moved to 67. Too many people are still valuable to this country and economy for them to exit the workforce at such an early age.

Details

Problem:

Social Security has been nothing more than a way for politicians to suck more taxes out of the average worker. There is no Social Security bank account and the money we’ve been promised has been spent on other things. This system is currently living day to day on IOU’s, which can never be paid back. Also, the return on your money is lower than you could have received by just investing in U.S. Treasuries or Certificates of Deposit (CD’s).

How are we going to insure everyone who paid into Social Security will get their fair share?

Our only choice is to restructure the Social Security system. We need to phase out the government’s involvement as an investment bank, essentially taking in our deposits and loaning it to Congress. Instead, we need to phase in Mandatory Retirement Accounts which are personal and individual.

What if I’m already receiving Social Security, will that change?

No, you will receive payments just as you were promised. What will change is the age for receiving Social Security will be raised to 67.

Wait, I’m 60 years old and have my retirement planned around receiving a Social Security check at age 62?

We understand many people are close to retirement and have made financial decisions based on receiving Social Security payments at age 62. If you are 60 years old when this plan is enacted you will still be able to receive your payments at age 62 but you may be better off choosing to opt out of the program for a Mandatory Retirement Account (MRA).

Why would I want to opt out when I’m so close?

There are some very important advantages to opting out of the plan. First, you will receive a pro-rated pay-out on your Social Security Account which will be placed in your MRA in the form of Treasuries. Second, this money will grow allowing your retirement funds to last longer and be greater than they would in the Social Security system. Finally, unlike the Social Security system you own your MRA and it will pass tax free, on to your family in the event of your death.

What are the rules on the Mandatory Retirement Accounts?

Mandatory Retirement Accounts in many ways will resemble a Roth IRA. They will be funded with after-tax dollars but you will not be taxed on withdrawals. Your MRA must have at least ½ of the total amount in federal/municipal bonds or treasuries. The other ½ of the total amount can be invested in any major index ETF, 4 star or better mutual fund, CD, or Cash. You may begin to withdraw from your MRA on your 65th birthday. Each month you can withdraw an amount based on a prescribed calculation. This account will pass; tax free, on to your family in the event of your death.

Can I borrow from my MRA or make an early withdrawal?

No, under no circumstances will you be allowed to borrow from or borrow against your MRA account. You will not be able to withdrawal any of your MRA money until your 65th birthday.

Won’t it be risky to invest ½ of my MRA in mutual funds and ETF’s?

Risk is a personal choice. If you choose to invest in ETF’s or Mutual Funds instead of a CD, only 10% may be invested in any individual ETF or Fund. These also can not be ultra or multiplier funds which change at a rate 2 or 3 times the underlying index. This will protect people from being too aggressive while still providing much greater returns.

So, I’m either in or out?

No, every person who has paid into Social Security will have 3 options.

Option 1 is to stay with the current plan paying 16% of all after-tax earned income to the Social Security Trust. Each person will receive their payout but the age will be increased so the earliest payments will begin at age 67.

Option 2 will give you the opportunity to pay only 8% of all after-tax earned income and receive ½ payments starting at 67. Another 8% of your after-tax income must be direct deposited into a Mandatory Retirement Account (MRA). You will receive a prorated pay-out of past deposits in the form of Treasuries which will be deposited into your MRA. You may begin to withdraw from your MRA on your 65th birthday.

Option 3 allows you to opt out of the plan entirely. You will receive a prorated payout of past deposits in the form of 30 Year Treasury Bills deposited in your MRA. 16% of your after-tax earned income will be direct deposited into an MRA account. You may begin to withdraw from your MRA on your 65th birthday. You will be required to pay 3% of your after-tax earned income into the Social Security system until such time as the Social Security Trust is deemed over funded.

Why do I need to pay in 16% and not the approximately 7½% I pay in now?

This speaks to the lack of transparency in your pay checks. Currently, even though your employer pays the other 7½% it’s still your money. Your pre-tax wage should go up by 7½% on the day this proposal becomes law.

What if I’m already collecting Social Security?

If you are over 62 and are already collecting Social Security then you will stay in the system and you will receive your payments until your death.

What if I’m about to turn 62 and had my retirement already planned out?

If you do not want to wait until your 67th birthday, for Social Security, you would probably choose Option 3 and take your prorated payout in Treasuries. You will then be able to begin withdrawing from your MRA on your 65th birthday.

How much can I expect to receive if I choose Option 2 or 3?

Currently, Social Security has had an annual return of less than 3% on your money. We are estimating an annual return of 5% given the conservative nature of MRA’s. To give you a sense of the difference: If you were paid at the poverty level for the past 40 years and were part of Option 3, at 65 you would receive a check for $1100 every month until you were 105 years old.

How much can I take out of my MRA once I reach 65?

The amount you will be able to withdraw from your account will be calculated based on a 40 year life expectancy and an annual return of 5%.