Retirement has become a have or have-not club, either a person has earned, tax-free, a retirement funded by his or her company or they haven’t—then they need to be lucky. If they’re lucky, they may actually receive their full benefits. If they’re unlucky, their company will weasel out, by dumping it on the taxpayer, via bankruptcy and the Pension Benefit Guaranty Corp or find some other legal outlet.
Some economists and some in the media have speculated that General Motors is better off filing bankruptcy and dumping their retirement obligation on the taxpayers. But the speculation ended when it was found that GMAC, the credit arm of GM, had too many assets. Soon after, GM announced that the company would sell off 55 billion dollars in GMAC loans, apparently draining GMAC assets.
Several commercial airlines and numerous other businesses have dumped their retirement programs on the government. Not surprisingly, the Pension Benefit Guaranty Corp’s fund is nearly twenty-five billion dollars in the hole, and the deficit continues to grow. Government pension plans aren’t much better off, various state and local government departments in Texas are twenty billion dollars behind in their retirement obligation. Across America, there is nearly 500 billion dollars in unfunded pension benefits.
Sixty-five-year-old men and women will be working because their companies didn’t have retirement programs, and the government will be taxing them to pay for the retirement of people who retired in their fifties—all because their companies successfully dumped their retirement obligation on the government—that is morally wrong. The federal government should be prohibited from using tax money to guarantee the retirement of anyone—excluding Social Security.
Retirement programs are designed for a retiree to maintain the same lifestyle he had when he was working, but that’s a pipe dream—isn’t it? One company’s conservative management might put away a million dollars to guarantee a worker’s retirement of fifty thousand a year—a 5 percent return. The next manager, less conservative, might figure a ten percent return, reducing the retirement account to a half million dollars. A corporate raider or private equity purchaser might figure they can make twenty percent on the money and reduce the retirement account to a quarter of a million dollars. When the company is finally run into the ground, a workout manager might take the company into bankruptcy to reduce the company’s pension obligation to zero. Companies offer overly gratuitous retirement programs, artificially inflate numbers, and in the end, they let the federal government pick up the tab.
Pie in the sky, private retirement programs should be banned. Private companies and the government—federal, state, and local need to be out of the retirement business all together. The goal should be a fair and equitable program that guarantees all American workers a comfortable retirement—nothing more, and certainly not maintenance of a luxurious lifestyle. A constitutional amendment is needed that forces companies, unions, and the government—federal, state, and local to have a pay-as-you-go system.
The current system is a mishmash of private retirement, IRAs, 401 (k)s, and government programs, none of which works. With the exception of Social Security, the entire system should be junked, and individuals would have the sole responsibility for their retirement. Businesses would be forced to fund one Private Retirement Account (PRA) and a Social Security account for each employee. It would be a pay-as-you-go system—no future promises of payments. An outline of a retirement program:
1)Social Security: 7.5 percent employee contribution plus 7.5 percent from employer—guaranteed by the federal government.
2)Private Retirement Account: In a mandatory program, each employee would contribute 5 percent of his income to a PRA, and the individual’s company would match the 5 percent contributions. This program would be managed by the individual with strict investment guidelines, and it would follow the worker as he or she changed jobs.
3)The employer would fund the account on a monthly basis.
4)It would be a pay-as-you-go program, not a future promise that may or may not be fulfilled.
5)The PRA account would not be guaranteed by the federal government.
6)Each American would have the same retirement program, only the dollar amount would be different. If a person gets through high school and college and works for forty years, he or she would have a decent retirement waiting. Conversely, if a person drops out of school and works at minimum wage, he or she will have a smaller retirement. That is exactly how it should be.
7)The employee or the employer could add additional money to the account—year-end bonuses, for example—saving for an early retirement. The first ten thousand dollars would be tax-free; anything over ten thousand, would be subject to a tax at 50 percent of the current rate.
8)All government employees, federal, state, and local, would have a PRA and Social Security account. Government employees could receive bonuses up to ten thousand or ten percent of their salary if the budget is balanced and if there is extra money in their department’s budget. Federal employees have absolutely no reason to cut costs, save money, or balance the budget. If the government does away with its gratuitous retirement program and installs a PRA program with a bonus system, the budget would be balanced overnight.
9)Every American would have the same program, including part-time workers who work more than ten hours per week.
10)No public or private company would be allowed to accumulate retirement debt. Most of these retirement programs are turning out to be a huge tax on American’s future. Not only is that wrong, but it’s incredibly dangerous.
11)Individuals would not be able to borrow against or withdraw any money from their PRAs until they retire. No home loans or loans tied to the balance of the account.
12)Individuals with PRAs over 2 million would have access to the interest portion of their account at age fifty and prorated principal at age sixty-five. In other words, save and retire early.
13)Individuals whose account is over a million dollars would have access to the interest at age fifty-five and prorated principal at age sixty-five.
14)Individuals under a million would have access to interest at age sixty and prorated principal at age sixty-five.
15)The prorated principal would be 1/30th of the account per year at age sixty-five. In effect, the account would be drained at age ninety-five.
16)All current employees under fifty years of age with a retirement program would have a mandatory PRA set up. Companies would have twenty years to buy out employees between the age of 50 and 65 and thirty years to buy out the retirement of individuals over the age of sixty-five.
17)A one-time, tax-free, buy-out would be put in place. It would be unfair to take away a company guaranteed retirement program to set up a PRA and tax the money at the same time.
18)Unions would be banned from negotiating retirement agreements, including medical insurance. In effect, unions would only be allowed to negotiate salary—too many CEOs have used future promises as a negotiating tool.
19)At death, the account would be transferred to the retirement account of a spouse and/or children, tax-free. Accounts with a balance over a million dollars would have an option to be distributed to families members subject to inheritance tax.
20)The account would be protected from creditors, bankruptcy, and divorce, but not from financial fraud.
21)A married employee with or without children would be allowed to add to his or her spouse’s retirement account up to ten thousand tax-free. At divorce, PRAs would not be divided up.
Social Security—Stand-alone program
Social Security would continue to work exactly the way it works today, except as a stand-alone program, no longer a part of the federal government. The federal government has drained the Social Security Trust Fund. At www.treasuredirect.gov., it’s easy to see the amount of debt the federal government has accumulated. The intragovernmental holdings—about 3.8 trillion dollars—is money drained from the government’s retirement trust funds, more than half from the Social Security Trust Fund. Currently, Social Security is running at a surplus, and the surplus is being used to offset the federal government’s budget deficit.
This is a modern travesty—taxing workers for a retirement program and spending the money on anything, but their retirement is immoral. There are only two ways for the government to repay this debt, raise taxes, or print money. To fix Social Security, the first thing, is to get the retirement trust fund out of the federal government’s hands. Social Security should be moved to a chartered corporation, and the trust fund’s surplus invested in actual investments rather than government securities.
The mandatory PRA wouldn’t be another pie in the sky program. There would be no more: “we’ll take care of it and pay you later nonsense.” It would be real money invested in safe securities and controlled—up to a point—by the individual. In effect, we would have two mandatory programs: Social Security and a PRA.
Examples of PRAs:
At ten dollars per hour and forty hours per week starting at age twenty—$20,800 yearly income:
1)$1,040 employee contribution (5 percent)
2)$1,040 employer contribution (5 percent)
3)At 5 percent interest, at age sixty-five, the individual would have roughly $350,000 in his PRA—a retirement income of $17,500 plus Social Security.
4)At death, the PRA account would be transferred to the individual’s spouse and/or children’s PRA.
At twenty dollars per hour and forty hours per week starting at age twenty—$41,600 yearly income:
1)$2,080 employee contribution (5 percent)
2)$2,080 employer contribution (5 percent)
3)At 5 percent interest, at age sixty-five, the individual would have roughly $700,000 in a PRA—a retirement income of $35,000 plus Social Security.
4)At death, the PRA account would be transferred to the individual’s spouse and/or children’s PRA.
At thirty dollars per hour and forty hours per week starting at age twenty—$62,400 yearly income:
1)$3,120 employee contribution (5 percent)
2)$3,120 employer contribution (5 percent)
3)At 5 percent interest, at age sixty-five, the individual would have roughly $1,000,000 in retirement—a retirement income of $50,000 plus Social Security.
4)At death, the PRA account would be transferred to the individual’s spouse and/or children’s PRA.
Obviously, people won’t get five percent interest every year; some individuals will luck out in the stock market while others will lose money. Pay raises, inflation, and periods of unemployment were not taken into account.
On top of the mandatory contribution, an individual could add money to his account, up to ten thousand dollars per year tax-free. He would be allowed to add more than ten thousand, but that money would be taxed at fifty percent of the current tax rate. For example: an individual who’s making 250 thousand a year could add fifty thousand a year to his PRA, the first ten thousand would be tax-free, but forty thousand would be taxed at half the current tax rate.
An employer could also add money to the account, a year-end bonus might also include additional money in his retirement account, but the same tax guidelines would apply. Doctors, attorneys, or self-employed individuals could add a hundred thousand dollars or more to their accounts, at half the current tax rate. A CEO might put in a million dollars per year—there would be no maximum amount.
PRAs would be set up at American-owned banks, and the employer would transfer money to the account monthly. The bank would provide quarterly updates to the employee and allow monthly telephone access to the account balance and deposits. Part of the money would be protected by normal banking laws—the first fifty thousand would be in an interest-bearing account and would be protected by the FDIC. Brokerage accounts would have a minimum of five thousand and could be opened with any brokerage firm. The bank would transfer the money to other investment accounts each quarter. Individuals would not have access to the money in the account—no loans or special privileges at the bank. Retirement funds are for retirement, desperate people should not have access to the balance.
Investment guidelines for the Social Security Trust Fund surplus and for PRAs
Finding a balance for invested money is essential; it would make no sense to invest massive amounts of money in the stock market, a risky investment or in federal government bonds another risky investment. These are some common sense rules for investment.
1)The first fifty thousand would be deposited in an interest-bearing bank account at Certificate of Deposits rates or higher
2)No more than 25 percent invested in the America stock market
3)No more than 5 percent invested in foreign stock markets
4)No more than 5 percent invested in venture capital
5)No more than 5 percent invested in federal securities and bonds
6)No more than 25 percent invested in state, city, or local bonds
7)No more than 25 percent invested in corporate bonds
8)No more than 40 percent invested in housing bonds
9)Zero percent invested in a company owned by the individual or the company he or she works for—this would end this particular conflict of interest
10)The account could be transferred from bank to bank once every five years without a penalty or once a year with set penalties.
PRA’s and Social Security would have identical investment guidelines. Currently, the Social Security surplus is fully invested in federal government bonds. From this layout, you can see that this would change substantially. These guidelines give the trust fund the flexibility to make a return on their money and become a solvent fund. It does not allow the federal government to drain the surplus and use it to offset Congressional spending habits.
PRAs need to have a flexible investment strategy. An account that is 100 percent invested in the stock market is at risk. Money can be made in the stock market—for every person who makes money, there is another person who loses money. In the stock market, the key and only strategy is not to be left holding the bag. A stock might go up a hundred percent or more, but to make a profit, the individual has to sell and someone has to buy. The Social Security Trust Fund’s surplus and PRAs would have limited stock market exposure.
In addition, an individual would not be allowed to invest retirement money in his company, or in the corporation he works for or a company owned by his employer. Enron employees had 100 percent of their retirement tied to one horse—in retrospect, that was ludicrous. Too many retirement programs have become paper accounts—a company’s accountant transfers assets from one account to a retirement account, where the money is reinvested by the owner of the business. Retirement funds needs to be invested in safe securities.
This investment plan achieves a nice balance. Up to thirty-five percent of the fund could be invested in the stock market—including foreign stock markets and venture capital. Anyone with a million dollars in the bank would want to put 5 percent of his money in venture capital, which could pay off big. While sixty-five percent would be put in safer investments—housing, government, and corporate bonds.
Cutting Social Security Benefits
The federal government has borrowed 9 trillion dollars. Roughly, 2 trillion of this is the surplus from Social Security Trust Fund. Another 1.8 trillion is from other federal retirement programs. In the 1980’s Ronald Reagan borrowed money for his Star Wars initiative. Following in his footsteps, George H. W. Bush, Bill Clinton, and George W. Bush continued to borrow money to fund the federal government. The people who benefited the most from the federal borrowing spree are the baby boomers. It’s been 26 years of lower taxes and a better life—that’s obvious—because we didn’t pay enough taxes to cover the federal government’s budget. It’s time for baby boomers to repay that money.
Social Security benefits would be cut for those with large private retirement accounts, stocks, bonds, and interest-bearing accounts. Starting at an annual income of 38 thousand dollars, each individual would lose five percent of his Social Security benefits for every thousand dollars over the 38 thousand threshold. Individuals whose retirement income and/or investment income is greater than 58 thousand dollars would lose 100 percent of their Social Security benefits. This is fair—baby boomers allowed the federal government to drain the trust fund and borrow huge amounts of money. It is not up to our children and grandchildren to repay this debt.
In effect, wealthy retirees in America would lose all of their Social Security entitlement. But over the last 26 years they have benefited from low taxes. Many of the 8.8 million millionaires in America wouldn’t be millionaires if the federal government had a fair tax. There are 70 million baby boomers, many with huge pensions, ready to retire, and most of these people don’t expect the Social Security program to hold up. The government can do some fancy accounting for a while, but it’s time to make real cuts—it will be dangerous for us to wait until the end.
The retired elite would lose their benefits, but it’s not only the wealthy. Here in Texas, there is a huge group of individuals working on a cash basis. Many of these individuals will never file a federal tax return and never pay a penny into the Social Security Trust Fund. Yet when they reach retirement age, they want to participate in the retirement program. It’s their entitlement, right? We need an amendment to the Constitution forbidding these workers from participating. When an individual manages to avoid paying taxes his entire life, he should not be allowed to participate in the Social Security program, crooks should not be entitled to a retirement check. Being poor shouldn’t be an excuse to break the law and get a retirement check, too.
Currently, children of foreign workers who are born in America are granted citizenship. Some of these kids leave America with their parents and never work a day in this country, or pay a penny in tax. Some of these children are suing for their entitlement. That’s nonsense. Being an American citizen shouldn’t mean being entitled to free, undeserved money. Being an American should mean living a responsible life, paying federal and Social Security taxes, taking care of themselves and their families, and then reaping the reward. Social Security should be cut to zero for foreigners who have managed to become America citizens and who never worked in America or paid into the Social Security retirement fund.
Double dipping into retirement programs has become quite popular. Teachers, federal employees, and military retirees, who are exempt from paying Social Security, are the biggest culprits. They retire so young that they can easily receive Social Security benefits on top of their government retirement. A law banning double or triple dipping in government-run retirement programs should be passed.
Another group that needs to have their benefits curtailed is those living in foreign countries. Social Security is for Americans and America—not for Russians, Vietnamese, Mexicans, or Chinese. The beauty of Social Security is that senior citizens become part of the economy. A woman, for example, receives $1500 a month in Social Security benefits, she pays her rent, telephone, electric, and cable bill. She buys food and a few small purchases each month. She goes out to eat once or twice each month. These things benefit the American economy. As much as a third of her benefits end up back in the hands of the government as property tax, sales tax and other forms of tax—the woman benefits and America benefits from her retirement. But some retirees choose a greener pasture.
Some Americans and many Russian-Americans, Vietnamese-Americans, Chinese-Americans, Mexican-Americans, and others do not intend to retire in America. At retirement, they head back “home” to Russia, Mexico, Vietnam, India, or China—where they benefit by the lower cost of living in their “home” countries. My “home” country, the United States of America is no longer benefiting from their Social Security benefits. In fact, their Social Security benefits are becoming a drain on this country’s economy. As many as a quarter of future retirees could be living in countries other than the United States—a 350 billion dollar loss to America’s economy, an unsustainable loss.
A constitutional amendment is needed that cuts benefits in half for Social Security recipient living outside the United States. Besides cutting his or her Social Security benefits in half, no one living in a foreign country would be allowed to receive Disability Insurance, Widowers Benefits, or Supplemental Social Security. In addition, it would be mandatory that anyone who cheats—by lying about where they live—would lose all of their Social Security benefits for the rest of their lives.
In chapter four, it was noted that the Death Certificate is fast becoming the most important certificate in America. Here’s why. We have millions of American retirees living in Mexico, China, and other countries, all benefiting from living in cheaper countries.
Most of these retirees have their checks automatically deposited in a bank, like the Islamic Bank of Iran or the National Communist Bank of Vietnam. When these people die, there is no death certificate. The county usually prepares the death certificate but there is no county government in other countries and no one in America is notified—family members and/or a companion keep collecting the retirement check. We need a constitutional amendment mandating that all senior citizens receiving Social Security or other retirement income living in America or other countries make a yearly check-in visit to the Department of Identification, Licenses, and Records or Social Security Administration—at their expenses.
The Social Security Administration would be required to get a digital picture and fingerprints, along with a DNA swab. If the person doesn’t show up, the Social Security check would be stopped. If the picture doesn’t match, the fingerprints would be examined. If fingerprints don’t match, the DNA would be run. If that doesn’t match, the Social Security check would be stopped. The Social Security Administration has no way to know when or if someone dies in Iran, Pakistan or any other foreign country. Americans need protection; this would protect our economic interest and the economic interest of all retirees. Numerous senior citizens have been killed for their Social Security benefits in America. It could happen in other countries, too.
Get mad if you like, but in our hearts, most baby boomers know that we have earned unsustainable retirement benefits—70 million baby boomers have turned themselves into elite retirees with huge medical and monetary benefits. In the future, some thirty-five-year-old, making forty thousand dollars a year and paying twenty thousand dollars a year in taxes will lose a son or daughter because he can’t afford health care. He’ll go out and kill a baby boomer who has a sixty-thousand-dollar income from a big company and twenty thousand dollars in Social Security benefits and twenty-five thousand dollars in Medicare benefits. The attorney will argue justifiable homicide and the jury will find him not guilty.
Still mad? Just about every single person in America has had his or her benefits cut. Senior citizens will take a big hit, military and government personnel will be hit, the poor, and Americans from other countries will be hit, too. But this is exactly what has to be done. We have to fix our country. If we don’t do this, there will be nothing left to fix. This is an orderly plan to reduce benefits before it’s too late.
Still not convinced? An acquaintance who recently retired, bragged that paying taxes wasn’t that bad, “Write the check” he said, “and send it, taxes aren’t that bad.” His income was a quarter of a million dollars per year and each year he earned an additional quarter of a million dollars in untaxed retirement income. His car, auto insurance, and medical insurance were paid by the company, and he earned numerous untaxed frequent flyer miles. Compare that with a self-employed individual or the Wal-Mart worker without a retirement program. This man has an elite lifestyle and has an elite retirement. Because the people with big retirements are in charge, it goes untaxed—it’s time to ban untaxed private retirement programs.
Poverty is a choice. On the eve of baby boomers’ retirement, the government has a 250 billion dollar yearly deficit that never seems to go away. The government owes massive amounts of money. The future of America’s wealth is at stake. We can choose poverty or we can choose an orderly reduction in benefits.
By junking every single retirement program except Social Security and adding mandatory PRAs, retirement in America would be simplified. Because companies would pay-as-they-go, retirement programs would never become a burden on a company or on America. Because each of us would have the same retirement program—only the dollar amount would differ—we would all be paying the same tax rate on our income. That will work for us and for our country.
 In the news, we constantly hear about the low saving rates of Americans, but most corporate employees have retirement programs so large that there is no need to save a penny. Government workers, city, state, and federal, have even better retirement programs—and teacher’s retirement is better than all of them—why save?
 It may seem to be working but it’s not. Companies that close factories in America and move to China do so in part because they can lower their retirement costs. In effect, thousands of thirty-year-olds lose their jobs because the company has to pay for thousands of retired individuals. Other companies declare bankruptcy to dump their retirement programs or, like Enron, thousands of people lose everything.
 If I had the authority to do one thing. I would move the Social Security Trust Fund out of the hands of politicians in Washington. They have committed a crime against humanity by draining the fund.
 We can’t expect a twenty-five-year-old worker to pay interest on the national debt, fund medical benefits for the retired elite, and make huge Social Security payments for the wealthy whose incomes are greater than his. He’s not going to do it. A friend who has a big retirement from a corporation said, “In the future, the only good baby boomer is a dead baby boomer.” Another friend, a retired executive with a major insurance company, said, “I’ve got it made as long as they, meaning our children, don’t shoot me.” Baby boomers are quite aware of the mess that has been made by the federal government and gratuitous private retirement programs. We have to fix it.
 I love my country and I have a right to protect my country’s economic interest. Social Security should not be a drain on this country when others retire in foreign countries. Mexicans, Russians, or Vietnamese do not have the right to take away my right to protect my economic interest or my country’s economic interest. What’s more, I’m sick of hearing about the rights of other people—I’m absolutely fed up with people calling others racist because they don’t like certain policies as if that other person has no rights at all. I have an absolute right and the moral responsibility and duty to my children and grandchildren to protect my country. No one can take that away.