Bloomberg on retirement

https://www.bloomberg.com/amp/news/articles/2019-06-13/world-s-retirees-risk-running-out-of-money-a-decade-before-death
I have written a big on this issue before, and if you search my social security label on my blog you will see why I am highly critical of Americas retirement system.

When designing a retirement system which works for ALL, there are a few key ideas I believe will help make something which works for everyone.

1. A dollar deposited is counted as a dollar.
2. Retirement savings must have a balance in a fully convertible currency (no Bitcoin) which belongs to the beneficiary.
3. The average retirement account for the average worker must gain interest past inflation and withdrawals.
4. All money left over when someone dies is property of the deceased and is inheritable pursuant to the laws of the state the deceased resided in.

Social security breaks all of these rules, as I have described before, and fails to increase social mobility for families, which is one major advantage of having a 401k. Both sets of my grandparents have IRA accounts, as do many people of their generation, and when my Washington GET program ran out (it was designed very similarly to a Ponzi scheme or OASI) one set were able to use their retirement to reduce the student loans I would have needed to take out.  My great grandparents had traditional pensions, and their main retirement plans disappeared upon their death. We shouldn't go back.

The more I think about the retirement crisis, the more I am convinced we should give people the opportunity to privatize their Social Security accounts. The Old Age and Survivors Insurance program has a serious racist aspect to it. White men live to be in our mid-70s on average, while the average African American man does not live to his 70th birthday. A regressive tax for Social Security further reinforces this racist inequity. If someone had the option to privatize their social security, the average person would be better off than they would be under the current system, and if they die in their 60s will be able to leave a legacy to their next of kin, usually children, as opposed to the current system where the government keeps the difference. Unlike other welfare programs in the United States, OASI transfers money from the working poor to people who live longer, who are usually richer and white. Source

Giving people the choice to deposit 100% of their social security taxes into their IRA, which can also be used for a down payment on a house (since owning a home is the major way middle class families in the United States accumulate wealth) will solve the retirement crisis for my generation. It wont help current seniors, they screwed themselves through their generations politics where Republicans created the student loan crisis, did not do any of their ideas for social security, and Democrats insisted any criticism on Social Security is an attack on the middle class. One important concept in economics is liability, and the problems which arise when people do not see consequences for their actions. We must avoid the moral hazard of not reforming Old Age Insurance, which will perpetuate down future generations with higher taxes and fewer benefits if we maintain the status quo.

The problems with social security are already here, and the longer we let dogma stand in the way of good policy, the more we will allow people to be seriously harmed. Perhaps Social Security is a sacred cow because it is one of the most effective transfers of wealth from the poor to the rich in America, so neither party will touch it, while we can't even get every Democrat in Congress to back a public option, which has the possibility to save us $2000 per capita per year or more if it helps push our average cost of health care down to the cost other countries pay, which is the equivalent of over $6 trillion per year households will be saving in sum.

We need a better system for retirees in America today. 13.4% is far more than sufficient for the vast majority of Americans to invest for their retirement. When economic studies like this pop up on my feed regularly, we MUST fix our retirement crisis as soon as possible and put people over dogma.

6 point economic plan to save the middle class

There are some serious problems in the current American economic system which hold the middle class back. All of these policy decisions reduce income mobility and hold our economy back. Here are what I see from my life as the biggest problems in the American system which hold Americans back:

1. Our health care system has some major problems. We spend way too much for drugs, and there are situations where employers need to hold back hiring because it will make it hard to stay in business. Getting access to health care in the USA is far more challenging than anywhere else in the world, and denying people for health insurance claims is a major cause of debt which holds people back. Many disabled people today end up in a welfare trap where if they get a job they might not have sufficient health coverage for their particular needs. This holds people in poverty.
2. The student loan crisis is reducing the number of Americans who are home owners, convincing people in my generation to put off having children, and hurting our economy. It must end. Many people need to put off going to college to qualify for FAFSA in order to get educated. I would rather have people making $50,000 per year as opposed to $30,000 per year from delaying college.
3. Social Security Old Age Insurance has some major flaws. If someone dies soon after retirement the 13.4% of their paycheck which they paid over their lives does not go to their heirs, stealing money from the working class, holding people in poverty. For the amount that people put in over their lives, the amount Social Security pays is really fairly measly compare to other options. Someone who retires this year with a $50,000 income would receive $1300 per month ($15,600 per year) versus the $46,000 which they would have earned from the over $800,000 which they would have in their account if their retirement money would have been in if they had put their money into a municipal bond fund which averaged 6% per year. The current system doesn't even pay as much as you would have made with 30 year treasuries averaging 4% interest at median household income, adjusted for inflation. Would you rather make $15,000 or $46,000 per year?
4. Our tax code is not progressive enough. Capital gains get a special rate which significantly reduces the treasury and give a massive tax break to the wealthiest in the country.

With fewer job opportunities because of how our health care system works, people my age drowning in debt, our retirement fund is not providing very good benefits for the amount we pay in, and high taxes on the working class, it is no wonder why so many Americans feel stuck.

Here is my plan to increase income mobility in the United States:

1. Universal health care. Either have a public option, like the German system, or a single payer system like Canada.
2. Tuition Free College. Every American going to a public university should owe nothing in tuition. No one should ever have to delay their education due to financial restraints.
3. Universal Basic Income. Every American gets $5000 per year (plus inflation) every year of their lives. For minors, half of this money goes to their legal guardian, half goes into a trust made of municipal bonds which they have access to when they turn 18. This is cheaper for the government than our current Old Age Insurance Program, and inheritable if someone dies early, keeping the money in the family after estate taxes.
4. Reform Old Age Insurance. The old age insurance program is in reality a Ponzi Scheme, and allowing Americans to choose to put the 13.4% of their paycheck which goes to the program into a private fund will be a major boon to the middle class.
5. Progressive taxes. Capital gains should not get special treatment in terms of their tax rates, and should be taxed as regular income when they are withdrawn. We should have negative taxes for people who make less than $100,000 per year (for a single individual) and have a top tax rate of 50% which only people who make millions per year would pay. Instead of using marginal tax rates, the tax rate should be calculated using a rational equation, which is simpler and allows for a more fair curve. If we need more money we can lower the threshold where people start paying taxes, or adjust tax rates in other ways, but the government should only run deficits during years of recession. Yes, I am a hard core Keynesian. Also, 5 years after writing this, I still can't find any problems with it.
6. Retirement account flexibility. People can get locked into bad retirement plans and have to change jobs to improve the most important financial account of their lives. People need the freedom to modify how they invest as they see fit, change their retirement management companies, when they see it as being important, or find a better provider. Competition in the financial services industry is a good thing, and this will foster that.

Each plank in this plan works together well, for example:

You are 18 years old and about to go to college. Under the current system if your parents or grandparents didn't invest in your going to college you will almost certainly take out student loans which you will pay off when you should be investing in your retirement fund. You will have limited job opportunities due to how our health care system works which limits employment opportunities. You might be lucky to have a car which makes it easier to find a job, since on campus jobs are very competitive, but you will probably spend your twenties looking for work and paying off student loans off of very little money. When you finally do get a job, 13.4% of your income will go to a retirement plan which will not even provide enough for you to survive on in your retirement. You then have to save money for any children you might have for when they are in college with the 80% or so of your income you keep after taxes. Good luck.

Under my plan however, everything is different. Starting when you were born you will receive $5000 (adjusted for inflation) per year from the government for being an American citizen. Half of it is stored in municipal bonds, gaining you tax free interest, and the other half goes to help your parents/legal guardians raise you, lowering the likelihood they will be in a debt spiral. When you graduate from high school at 18, you decide to go to college. You don't have to worry about paying tuition knowing you will likely pay back to society if and when you are yourself successful. Your Universal Basic Income Trust is there to help you get transportation if you need it for a job, and provides you a nest egg which you can dip into if needed, along with $5000 a year (plus inflation) which will help you pay rent in college if you need to. You graduate debt free, and get a job. You keep most of your income unless if you are particularly lucky, and you are able to invest for your future. Your basic income provides you something to fall back on, reducing the need to go into debt your entire life, and when you retire at 65, the fund you invested your UBI into will generate by itself enough money for you to live for the rest of your life. Supplementing your UBI into your retirement fund when you are young, which you can do since you are not spending money on student loan interest, will definitely provide sufficient income for any American to retire comfortably on the interest of their retirement fund, leaving the principal for their children upon their death, improving their family's financial status for generations to come.

Which do you prefer?