On Suggestions to the Super Committee

Several weeks ago, I sent a letter to Senator Rob Portman (R-OH), who not only is one of my senators, but he also was my former representative and is a member of the Super Committee. I focused on retirement, including Social Security by aiming at four points: 1) Establishing individualized, privatized Social Security accounts, 2) increasing money flow into the Social Security system, 3) maximizing avenues for individuals saving for retirement so they are less likely to seek government assistance, and 4) decreasing the tax rate for all businesses (employers).

With this focus on retirement, examining the current system of retirement accounts is part of the solution. For instance, the IRS currently limits IRA contributions based on income. To be honest, there is no good reason to limit retirement contributions in this manner. After all, Bill Gates has as much of a right to deposit into his retirement account and any middle class citizen.

With this in mind, I suggested these 11 points.

1)   Everyone 30 years or younger shall establish an individual, privatized account into which a 5% payroll deduction is automatically deposited. These accounts should be employee-directed, but with limited investment options to minimize risk.

2)  Everyone 30 years or younger shall have 1% withheld to be sent to the current Social Security fund.

3)  Employers deposit 4% payroll deduction into the employee’s individualized account.

4)  Employers also send 2% to the current Social Security fund.

5)  Raise the Social Security salary cap to $150,000.

6)  For all salaries above the salary cap, employees pay 1% to the Social Security fund.

7)  The employer’s obligation ceases at the salary cap.

8)  If they so choose, all employees can deposit into their approved IRA regardless of salaries: limited to $2000 into a traditional IRA and $5000 into a Roth IRA.

9)  If they so choose, an employee can submit participate in a 401K up to a maximum percentage established by the law. Whether or not an employer wishes to contribute to an employee’s 401K is a business decision.

10) Contributions to 401K, IRAs, and individualized Social Security accounts should have no cumulative bearing on the others, thus allowing n employee to build retirement wealth; therefore, no need for government assistance.

11) Employees currently over 30 years old continue to pay in accordance to the current system with the salary cap raised to $150,000 plus the additional 1% for income over $150,000 to the general fund.

I realize that each committee member is probably swamped with correspondence, so I do not have much hope that Senator Portman even saw my letter, let alone the committee doing something with the suggestions – but at least I tried.

6 thoughts on “On Suggestions to the Super Committee

  1. I need to look at this when I’m less tired and less sore, but it looks VERY interesting. My only problem with it (that I can think of right now) is allowing any amount of contribution. I believe the original intent was to keep high-income folks from “hiding” income within their IRAs, since contributions are before tax. I’m not clear if you call for the contributions to be made pre- or post-tax, but I would make sure the “above the cap” folk would definitely pay taxes before squirreling their money away. We need to get the high-income folk to pay MORE of their share!
    Otherwise, very interesting!

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  2. That’s great that you contacted your Senator! I liked this part a lot:

    These accounts should be employee-directed, but with limited investment options to minimize risk.

    The market can be very cruel. Oh I would add that if politicians dip into it, off with their hands.

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    • Spinny,
      The markets being cruel is one reason why some hesitate regarding individualized, private accounts. Then again, so are systems that suddenly decrease payments, suddenly exclude people, or simply go belly up. I also had two concerns: maintaining the concept of Social Security covering the needy and transitioning from one system to another. Thanks for commenting.

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  3. Pingback: Flashbacks: On Politics | A Frank Angle

  4. A good idea, Frank, to try to increase people’s commitment to saving for retirement. Unfortunately, judging by the resistance the ACA is getting, it’s against human nature to plan further ahead than next weekend. Still, an admirable effort on your part. (Snail mail? Really? Welcome to the dinosaur club! 🙄 )

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    • Jim,
      One would think that an increase in personal retirement, decrease commitment by the gov’t, and lower taxes on business would get some consideration. Oh well, I guess they are too concerned with BS.

      Like

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