American Fairhope Retirement
As determined by their established PF's at privatization, the government must return or pay-back the Social Security and Medicare tax payments, which were previously paid by all tax payers.
Taxes should be refunded to all American workers, based upon their total lifetime Social Security and Medicare taxes paid. Refunds should be a pro-rata share, as determined by Table-I; or by elections made during open enrollment. Typically for example; those under age 31 would receive a 100% refund. Those between ages 31-50 would receive a pro-rata share, according to Table-I. However, those over age 50 would receive no tax refund; unless partial or complete privatization is elected during open enrollment.
Retroactive Investment gains should be provided by Uncle Sam, who should be decent and choose to do the right thing. The author suggests a federal government retroactive payment; of 3.0% APR, compounded annually. Such return is a reasonable and modest expectation, for federal use of our money. Moreover, The SS-Ponzi agency has all of the necessary personal data and world-class computer hardware, provided by American tax-payers; with which to perform such calculations.
Obviously, if someone is already over age 62 at privatization and draws Social Security retirement, their 'Private' PF is 0.0%. Consequently, such a person remains on 100% Social Security and receives no refund of prior SS-Tax and MC-Tax.
[Refund$] = [PrivateParticipation%] x [TotalContribution$]
[TotalContribution$] should include all Social Security and all Medicare tax payments, which were ever personally made; before privatization. Note; any retroactive investment gains, if paid by the government; are not included within [TotalContribution$].
Exception; for self-employed small business owners; the sole proprieter business 'matching-half' of SS-Tax and MC-Tax should be excluded from [TotalContribution$].
Bob (From previous example): Electronic Technician Employee; Age 44 at Privatization. From Table-I, he is 30% Private. As a result, Bob should receive 30% of his [TotalContribution$]; as his tax refund.
Sam (From previous example): Union Electrician Employee (Journeyman); Age 29 at Privatization: Consequently, by Table-I, he is 100% Private. As a result, Sam should receive 100% of his [TotalContribution$]; as his tax refund.
Susan (From previous example): Home Beauty Shop Owner; Age 26 at Privatization: Consequently, by Table-I, she is 100% Private. As a result, Susie should receive 100% of her [TotalContribution$] x 50%; as her tax refund. Exception; for self-employed small business owners; the sole proprieter business 'matching-half' of SS-Tax and MC-Tax should be excluded from [TotalContribution$].
Sorry, but the federal govenment can't afford to give any immediate refunds of Social Security and Medicare taxes. Consequently, each American tax payer should select their own personal and private investment firm for this purpose during open enrollment. Following privatization, the proper SS-Tax and MC-Tax refund certificates should be transmitted by the U.S. Treasury directly to the designated investment firm. All such investment participants must be able to review their accounts, by Internet access of their personal investment firm. (Think of the refund as a U.S. savings bond.)
Such a tax refund certificate may be redeemed (cashed) in a distributed manner from the U.S. Treasury, but only as Americans reach retirement age. Each certificate should pay the prevailing rate for government investment securities. However, as a special requirement, such a treasury certificate may not be redeemed; except for approved retirement after age 65, or for major-medical needs or disability. In general, such a special RSP should have the same characteristics as a tax deferred retirement savings plan (RSP).
Such deferred and distributed bond redemptions permit American Fairhope to become an affordable plan for the nation. Moreover; the participants who are paid-off; cease to become a financial liability for the SS system, in later years. The author believes that such an arrangement is a win-win plan for America.
Persons still employed and who are age 50 or older, would continue to make the traditional 6.2% SS-Tax + 1.45% MC-Tax= 7.65% direct payment. Their employer would also continue to match both of these tax payments. To be clear, this would be business as usual; where the government would receive its normal 15.3% tax.
Why is Sam receiving any matching money from his employer, since he is 100% 'Private'? That's because Bob, Mary and many others would also receive matching money, after privatization. If Sam was 100% on the Social Security and Medicare plan, his employer would pay the government 7.65% of his wages, in matching taxes.
Consequently, in lieu of matching taxes, why shouldn't Sam receive that entire7.65% matching payment from his employer? To do otherwise would discriminate against Sam and would not be fair. Moreover, the employer's 'matching half' of Sam's RSP deposit is very similar to the matching monies that many employers pay for contributions into 401k retirement savings plans. As a result, the playing field is made level for Sam, as well as for all other employees.
Ideally for employees under age 31, medical insurance should be provided by their employer. Otherwise, medical insurance should always be a matter of personal responsibility after privatization. Moreover, it should be realized that when Uncle Sam is caretaker, personal liberties of American citizens are always surrendered.
After privatization becomes effective, no children born in the United States should ever be a part of Social Security. Moreover, when Social Security can finally and completely be dismantled; that will be a grand day for America.
The remaining Social Security issues are complex with regard to disability, spousal and dependent benefits. These benefits should be treated as private insurance plans, optionally available to those with RSP retirements for the cost of a premium. Moreover, no American should ever depend on their working neighbors to proved 'free' government 'insurance' against the previously mentioned causalities of life. TANSTAAFL!
There is a fundamental inequity, which congress has stacked against self employed small business owners. There is no employer to pay half of the combined SS-Tax and MC-Tax for self employed small business owners. Consequently, the current 12.4% Social Security tax plus 2.9% Medicare tax is a heavy 15.3% combined tax burden. After business operating expenses, federal income taxes, and state income taxes are paid; then the additional 15.3% tax may be the final straw, which causes some entrepreneurs to fail. How would you, as an entrepreneur, like to pay money into your RSP; in lieu of paying those taxes to Uncle Sam?
In general, with the present Social Security and Medicare system, employers provide (1/2) x (15.3%) of wages in matching money to offset half of an employee's total SS-Tax and MC-Tax. The employer then passes that 7.65% payment onto the backs of the American public, by increasing prices of goods and services.
The author certifies that he has independently conceived the American Fairhope Retirement Plan, which has been presented herein; without reference to any other plan or plans, which may or may not have been presented elsewhere.
Bridging the Financial Gap
With or without privatization, Social Security will have serious cash short-falls; which will ultimately lead to collapse of the system. However, our federal government got us into this mess and certainly has obligations to both current and near future SS retirees. Therefore Uncle Sam is morally, but not legally, obligated to do whatever is necessary to take care of all SS retirees.
One best option is to implement a special national sales tax, which should bridge the gap, to meet SS retirement obligations until Social Security can be closed permanently. The advantage of a national sales tax is that everyone consumes at retail; therefore this tax can't be avoided by anyone. Such a sales tax is another curse, but it may be necessary.
However, any national sales tax law must include a termination date, which can not be extended beyond closure of Social Security. Moreover, the tax rate must not accrue any excess money for congress to spend. Alternatively, the total SS-Tax rate (now 12.4%) can be raised, which would put more money into retirement savings plans (RSP's) and also help out Social Security.
It may be necessary to do both, by raising the SS-Tax rate and implementing such a national sales tax. Congress has a variety of other options to raise money for retirees, but every possible solution has disadvantages too. However, it is of utmost importance to make the best plan possible and act soon.
It should be recognized that the Social Security System is providing a poor return on the total collected SS-Tax of 12.4%. As a result, an individual may be able to make private investments, which will out-perform Social Security in a good market. But to be realistic, the financial world of investments has many uncertainties and possible pitfalls.
But with Social Security going bust, where is the safe haven with the government? You'll have to make your own determination, but the author believes that President George W. Bush knew the real score when he said that Social Security is going bankrupt.
Private retirement investors can always invest heavily in U.S. Government guaranteed securities, if they feel more comfortable doing so. However in this life we must act responsibly and make our best informed decisions, while accepting necessary risks and living with the consequences.
Moreover, it is your American right to hold firmly to Social Security for as long as it lasts. But beware; all signs are apparent and clear in foretelling the collapse and demise of our grand Ponzi operations, Medicare and Social Security!
You have the responsibility to seek competent professional financial advice because the author is not an expert and offers no such advice whatsoever.
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