In guaranteed retirement accounts, every employee would contribute a mandatory 2.5 percent of their salary and employers would pay another 2.5 percent of a worker’s earnings. (This is on top of the combined 15.3 percent of wages workers and their employers contribute to payroll taxes to fund Social Security and Medicare.)
The accounts, which would guarantee at least a 2 percent annual return regardless of market conditions, would be controlled by the Social Security Administration and the contributions would be invested by managers selected by the federal government.
- The Social Security Administration will oversee it. We know how well that has turned out.
- Dr. Ghilarducci stated that this plan would help everyone get a higher rate of return at a lower cost than 401(k) plans. Most 401 K plans are switching to low cost indexed funds. Actively managed funds that they are proposing have higher fees.
- Mandatory contribution of 2.5% for the individual and 2.5% for the employer will be more taxes for the small business owner.
- People who are not saving will more than likely not save more than the 2.5% – that along with the 2.5% from the employer does not solve the retirement problem – it is just not enough going into saving to create a retirement income stream.
- Creating a second social security payment plan does not help the majority of the population such as the 76.4 billion baby boomers. I would imagine you have to put decades into the system to get a higher payment.
- You get a guarantee of 2% and she expects a return of 6%. They will be taking risk. What happens when the market crashes or interest rate rise and the retirement accounts take a big loss? Guess who is propping it all up – you and I and our taxes
- Before replacing the 401(k) system they would need to fix social security system which is a far bigger problem. If they don’t fix it, the problem is expected to be at 11.4 trillion dollars. A trillion is a million millions.