2010-10-11

Guaranteed Retirement Account

Most of you are familiar with Aesop's fable The Ant and the Grasshopper. The story is about the hard working ants who prepare for the hard winter, while the grasshopper plays and sings. Winter comes and the grasshopper starves to death.

Today's fable is slightly different. The ant still works hard in preparation for the winter. The honey bee is added as a character to the story. The honey bee is like the ant... working hard in preparation for the winter, but as Fall approaches, the honey bee's winter stores are robbed leaving hardly enough for winter survival. The ants comes by unscathed from robbers, but harvest was light. The grasshopper is still focused on playing and singing with little care to the upcoming winter... but it is because he knows that the ants and the bees will be required to share with him.

Say goodbye to your retirement accounts. If to date you managed to miss the effects of the economy stealing a large portion of you nest egg, the government now plans to utilize your funds for the sake of the rest of the community.

In a nutshell, under the GRA [Guaranteed Retirement Account] system government would seize private 401(k) accounts, setting up an additional 5% mandatory payroll tax to dole out a "fair" pension to everyone using that confiscated money coupled with the mandated contributions. This would, of course, be a sister government ponzi scheme working in tandem with Social Security, the primary purpose being to give big government politicians additional taxpayer funds to raid to pay for their out-of-control spending.

From written hearing testimony (PDF / HTML) submitted by Economic Policy Institute (EPI) Vice President Ross Eisenbrey:

We need a comprehensive solution that addresses interrelated problems. For example, a system that places most of the burden for retirement saving on individuals will always have to wrestle with the problem of pre-retirement loans and withdrawals (simply plugging these leaks will not work, because many workers would stop contributing to the system). A system that relies on tax incentives to promote individual retirement savings will necessarily tend to favor high-income workers who can afford to save more and who benefit the most from these tax breaks. Conversely, a truly universal system would need to shield low-income workers from out-of-pocket costs or wage cuts. EPI has published and advocated what we feel would be an excellent national supplemental retirement plan, the Guaranteed Retirement Account which was authored by Prof. Teresa Ghilarducci, Director of the Schwartz Center for Economic Policy Analysis at the New School for Social Research.

If you would like to read more on the topic see New Lame Duck Threat to Bailout Union Pensions.

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