A Plan to Save Social Security

Wouldn't you like to see dysfunctional Washington and the anti-Trump news media actually get behind something that benefits the most people?

By Cal Thomas Published on July 25, 2017

It is no secret that what the major media seem to care most about is radically different from what concerns average Americans. While the inside the Beltway crowd continues to focus on alleged collusion between President Trump and Russia, real concerns like the future of Social Security are ignored.

Social Security’s Future

The Social Security Board of Trustees, a six-member panel who serve the federal government by offering a short-term and long-range forecast on the health of the Social Security program, has issued a new report, which says that while the retirement program will be “cash flow positive” through 2021, it is still in line to run out of money unless taxes are raised, or benefits are substantially reduced.

A New Idea

Financial Planner Ric Edelman has come up with an idea that is so simple and workable it could transform the aging program and make retirement more comfortable and secure for years to come. Full disclosure: Edelman, who has been ranked three times the number one independent adviser by Barron’s, is my financial adviser.

Edelman says reforming Social Security is essential because, according to the Pew Charitable Trusts, roughly 58 percent of workers have access to a retirement plan, while 49 percent participate in one.

Edelman notes that people who do have such plans don’t have much money in them, just an average balance of $159,000, according to the Employee Benefit Research Institute. That amount can only generate a few hundred dollars a month in retirement income, which is why even when Social Security is added to this pittance it can’t adequately provide for the needs of most retirees.

Edelman’s solution? The federal government would set aside $7,000 one time for each child born during the next 35 years. The money would be placed in an investment account managed by a blue-ribbon panel of investment experts appointed by the president and Congress.

After 35 years, the government gets back its $7,000 — increased for inflation — and uses the money to pay for children born during the next 35-year cycle, making it self-funding.

When the child reaches age 70, monthly benefits are provided — equal in income to what Social Security provides, allowing the current program to be replaced with no adverse effect on retirees.

An Investment

I asked Edelman about the politics of this, since Social Security is considered a political third rail, untouchable, highly charged. “That’s why I don’t propose altering how the Social Security trust fund is managed,” he said, “which is what killed privatization efforts years ago.”

Under his proposal (he calls it the Trust Fund for America), the money would be invested in a diversified portfolio put together by a panel of investment experts consistent with how the nation’s pensions funds and endowments are managed.

To keep the money from being “raided” by Congress, Edelman says each baby would be assigned an individual account, much like an IRA, and would receive annual statements showing the account balance.

Edelman says he is joining the Bipartisan Policy Center, a Washington, D.C.-based think tank that addresses the challenges facing the nation, to focus on fixing the problems with Social Security and ensure a stable retirement program for every American.

Anticipating criticism from the usual suspects who want to use Social Security as a political weapon instead of fixing it, Edelman says, “If anyone complains about my proposal, they need to complain about the nation’s pension plans, too, because I am doing nothing different from them.”

Wouldn’t you like to see dysfunctional Washington and the anti-Trump news media actually get behind something that benefits the most people? If surveyed, I’d bet an overwhelming number of respondents who are fed-up with issues that do not impact their lives, would scream “yes!”

 

Readers may email Cal Thomas at tcaeditors@tribpub.com.

Copyright 2017 Tribune Content Agency, LLC.

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  • Paul

    It won’t be ‘self funding’ until after 35 years which will likely eclipse $1 trillion of initial principal, especially if the starting funds are adjusted for inflation to be equitable to future newborns. Also how will legal immigrants and naturalized citizens be handled?

  • jgmusgrove

    This would seem to work only if investment returns are considerably higher than inflation; otherwise the earnings would be paid to the government as the inflated principle and there would be nothing in the bank to grow the next 35 years.
    If inflation were 3%, the $7,000 would need to return 2.81 * $7,000 or $19,700. If investment returns averaged 5% annually, the account would be valued at 5.516* $7,000 or $38,600. $38,600 – $19,700 leaves $18,900 to grow for the second 35 years, yielding $104,250 at the time of initial withdrawal. I am not convince the math works.

  • Keith

    This guy must not realize that pension plans are the scapegoat for every single city/county/state in financial trouble. Has he really never heard all the people crying about them?

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