There are 55 million American workers who have no pension or 401k plan. Social Security doesn’t provide enough money for most people to retire on. When those folks retire they will be in bad shape. It is also partially the fault of the people who either have lost their social security card and are lazy to go down to the administration office to get a new one.
We simply are not saving enough money to assure that we’ll be able to have financial security when we are no longer working. The answer to this problem is an easy fix.
Just add a voluntary payroll deduction plan to basic Social Security.
A plan proposed by the Association of Mature American Citizens called an ERA (Early Retirement Account)would work like this. When an employee is hired today they are asked, “How many dependents or exemptions do you want to claim when your paycheck is prepared? The more dependents you claim the less will be taken out for income taxes.”
The next question would be, “How much per paycheck would you want to put into your ERA?”
“What’s that?”
“It’s a voluntary retirement savings account, the minimum amount is $5 per pay period and you will not get taxed on any of the money when you collect, including any investment gain. You own the money, including any contributions the company puts in. And it is available at age 62.”
“If you are disabled or pass away before you reach 62, you or your beneficiary will receive the money. You can also take the money and transfer it to a different employer if you should stop working here. If you are not sure how much to start with we automatically will deduct $10 and you can always change the amount. ”
The money invested will be divided, 50/50 between a guaranteed interest account and an approved investment account. All of the administration will be done by the investment company just like an IRA and the Social Security Administration will oversee the entire program.
It is projected that the average worker contributing an amount similar to what an employee contributes to a typical voluntary deferred compensation plan, would have between $250,000 and $500,000 additional money at age 62. Contributions would be increased to keep up with inflation.
There is support for a payroll deduction IRA on both sides of the aisle and President Trump should include this concept as he addresses Social Security in the coming year.