Social Security Reform
Raymond Clum, who is running for the Republican Nomination for President of the United States in 2012, has an interesting proposal for Social Security reform.
Raymond Clum: “Hello, my name is Raymond Clum and I approve this message. I’ll spend some time since we’ve been talking about Social Security reform. It’s a pretty dry topic. I hope this will be informative. I hope it will make you think.
Right now the Social Security system has been forecast to start running a deficit in the year 2017. Right now it’s now April 9th, 2009, so we’re talking eight years at which point of time Social Security will start spending more money than it takes in in payroll taxes.
Now, in the 2008 election cycle in the Democratic primaries, Senators John Edwards and Barack Obama both supported eliminating the cap or lifting the cap on payroll taxes, which right now running at about 6.5% of the first $97,500. Beyond that it’s not increased. Now, sulking the rich may be a popular thing to do, but when you raise the cap it just doesn’t hit the super rich. It’s going to hit doctors, it’s going to hit managers in manufacturing companies. It’s going to hit high overtime union workers, it’s going to hit engineers, it’s going to hit attorneys. Well, that wouldn’t be a bad thing.
Anyway, I digress. 16% of the workforce involves sales and office occupations. Some of these are going to be teachers, smart businesses are going to be hammered. It’s estimated that $136 billion in economic growth will be lost if the cap is raised or eliminated over the next 10 years. And as many as 1.1 million jobs gone. Now, for all of the pain that that’s going to cause, it’s only going to extend the life of Social Security from 2017 to 2025, another 8 years.
In addition, if you were to die right now, Social Security will pay your beneficiaries a onetime lump sum of $255. That’s it, no more. Now, your dependent minor children may get a survivor benefit, but my plan for Social Security would not affect that, nor would it affect disability payments. It’s only looking at the retirement benefits of Social Security. My proposal would be to develop, for lack of a better term, a 401S program. The S meaning Social Security, similar to a 401K. People of age 30 or under would automatically be enrolled. People of ages 30 to 40 will have optional enrollment. 41 and above would not be eligible.
As part of enrollment in this program you have several options, in movement of your payroll taxes to your 401S account that you would then be able to manage in ways very similar to your 401K, where you are probably limiting your investment options to very safe funds, funds that would have slightly more risks than the Social Security purchases of treasury bills, but will give you a higher return.
If you were to opt in for a 5% reduction in your Social Security benefit, 2% of your payroll taxes would go into this fund. The money would be yours, 100% invested. All the profits from that would be tax free. In addition, similar to a 401K, if you were to die, that money in that fund would go to your beneficiaries, and I’d be willing to bet it’s going to be more than 255 bucks.
But anyway, you take a 5% reduction in your benefit, 2% get kicked in. You take a 10% in your benefit, 5% will get kicked in. 20% for 10%. 50% reduction in your benefits, 25% goes in. If you want to totally opt out of the Social Security retirement program, 50% of your payroll tax will go into your 401S account. That does not mean that the money being withheld from your paycheck is going to change. We would still be pulling out the 6.5% of up to $97,500. What that will permit is a time period where there would be a side deficit where increased benefits would still have to be paid to those that are 41 and up. But we will have the ability then to start paying back that debt, and further pay down additional debt with the additional funds that the lowered Social Security benefit would receive.
The other option which is not nearly as friendly is to extend the retirement age, again. I’m 37 years old, I cannot retire until age 70. My plan for the 401S will be very similar to the 401K. If you too chose to retire, you can access those funds at age 59 and a half without penalty. Not only that, but you will be able to borrow against those funds for the purchase of a home, for emergency medical bills. It would in every way, shape and form act like the 401K.
Now granted, I’m proposing this in 2009, not the greatest year for the stock market. But if you look at every ten year period of the stock market, it’s had a positive growth. Every 10 year period. And if I am not mistaken, I have checked online to get the exact number, but I recall on Dave Ramsey talking about a 5 year period… somewhere in the range of 90% of all 5 year periods have had a positive growth that outpaced inflation, outpaced yields on savings accounts, outpaced yields on treasury bills.
The stock market is a safe investment if you look at 30 years down the road. That’s the main reason this part of my plan I am not looking to involve those of age 41 and older. They’re looking at a closer retirement and I would not want market volatility to affect their ability to retire. That’s why ages 31 to 40 get a little bit longer to retirement. I would give them the option. Personally, I would really strongly for myself take a look at the 20% reduction in benefits for the 10% going in to the market.
But that’s just me. I know what I am comfortable with as a 37 year old. Granted, if I’m elected in 2012 I will not be eligible for my own program because I will be 41 at that time.
It’s a way for younger workers to not only plan for their own retirement better, to build up savings even outside of their company 401K or pension plan or the minimal benefit of a Social Security program, but it provides real tangible assets for survivors as well. It’s not a panacea, it’s not going to be without pain. But it is a start, it’s a discussion point, it’s a beginning. We have to do something or Social Security is going to bankrupt our country. May God bless you and may God bless the United States of America.”
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My question is “If my parent dies on April 30th, does his check which comes on May 3rd have to be returned? Also the stimulus check which comes later in May?