December 16, 2008


Stephen Mihm, NY Times - Teresa Ghilarducci, an economist at the New School for Social Research, has emerged as the primary exponent of "Guaranteed Retirement Accounts," or G.R.A's. The way they work is simple: workers who don't have access to a conventional defined-benefit plan would contribute 2.5 percent of their income (with the government seeding the first $600 of that amount). Their employers would then kick in another 2.5 percent. It's similar to a 401(k), except that the money would be deposited into an individual account with the Social Security Administration, which would pool the money and put it into relatively conservative investments. In administering the pool, the government would guarantee a 3 percent rate of return above and beyond inflation. On retirement, participants would receive an inflation-indexed annuity that Ghilarducci calculates would replace a quarter of the wages or salary an average worker was earning. For example, someone who contributed to a G.R.A. for 40 years and retired with a final salary of $60,000 would get an annual payment of $15,500, or 26 percent of the pre-retirement income. (Social Security currently provides another 45 percent of workers' pre-retirement income.) Like Social Security, the plan would be mandatory. Requiring workers to hand over an additional share of their income might not be popular. But Ghilarducci argues that only a program that forces people to save will prevent huge numbers of Americans from sinking into poverty during retirement. As for how to finance the new program, Ghilarducci has pointed out that reforming tax breaks for 401(k)s, which go disproportionately to high-income earners, would more than pay for the G.R.A's. Is such a plan plausible? "The last time the financial system was shattered," she says, "Social Security was born."


At December 17, 2008 8:09 AM, Anonymous Mairead said...

There's always some scheme, it seems, to ensure that the Wall Street casino will continue to operate without restraint.

Social Security is a "guaranteed retirement account", and the guarantors are the working people of the nation, not the billionaire predators milking the rest of us via the Wall Street roulette tables.

If working people need more money for retirement - which we do! - increasing the social security pension is the way to provide it. Funding? Tax those billionaires and their casinos - their wealth comes 100% from us.


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