Personal Retirement Accounts should replace Entitlements

Thanks for accepting. As per say the resolution, I will advance the notion that personal accounts should be used for personal retirement security rather than government entitlement programs. C1: Personal Accounts Generate Higher Returns Social Security has an annual rate of return of 1.23%. [1] The S&P 500 has about a 7% CAGR after administrative costs are taken in. [2] This is the average, so it includes both the horrible years like 2008 and the great years like 1998. Assuming that the person had the average household income of $43,000 [3], worked for 35 years and had a retirement lasting 12 years, we get drastically different results regarding the two choices. § Social Security (12.4% payroll tax), provides a retirement balance of = $234,330, or $1,627.30 a month. § Personal Account (12.4% rate) provides a retirement balance of = $788,674.57, or $5,476.91 a month. As we can see, personal accounts invested fully in the S&P 500 that yield just the average return of this index result with a fabulously high value, that would provide excellent retirement security. Since Social Security has such a low rate of return, people who invested in the stock market could easily invest lower percentages of their income while getting a higher return for their retirement. For example, using the income used earlier, one could invest only 4% of their income in the stock market, and still have a higher retirement balance, while having over 8% higher take home pay (before including Medicare payroll savings). To conclude, personal accounts invested in the S&P or other securities would create much higher balances for a secure retirement compared to Social Security. C2: Improves the Economy Having a huge infusion of wealth into the stock market makes the value of stocks go higher. This generates greater capital for businesses, which allows them to make critical investments in America through business expansion, wealth accumulation, investing in capital goods, or by increasing R&D. When businesses are allowed to use their wealth to pursue their self interest, society is better off with improved economic growth. Payroll taxes discourage hiring. By eliminating these taxes, you likewise get more hiring and employment. In fact, some studies have pointed out an increase of more than 10% more jobs in the long run, by cutting payroll taxes by 10 points, or more than 3% more jobs in the short run. Assuming that individuals set aside 8% of their income, using the transitive property, this means job creation of more 11.5 million new jobs from a conservative estimate. [4] (this includes the elimination of Medicare payroll taxes.) Economic growth leads to lower unemployment and higher wages, and thus a greater standard of living for society as a whole. Also, Social Security and Medicare together have unfunded liabilities in excess of $121.5 trillion dollars, or more than $1 million per taxpayer. This is devastating, purely diasastrous to the economy. It's purely a message of economic devastation. [5] C4: Economic Liberty ----- Freedom By letting the individual have their own personal account, they are free to choose how they use their money, not acting under government coercion. This economic freedom leads to improved personal wellbeing — and people would have greater take home pay. Personal responsibility would make sure that often-times the money is used prudently and is fit for individual needs. Personal accounts guarantee economic freedom, you are free to choose how you use your money. Wealth accumulated in personal accounts could be passed onto their kin after their death, allowing families to have greater economic security. ----- Tax Relief Payroll taxes are regressive taxes, and specifically harm the poor. The 15.85% of income that the poor pay in payroll taxes alone kills job creation and harms them particularly negatively by reducing their income. In fact, for some ethnic minorities they get back less in benefits more than they pay in. [1] For the average household income, income would rise by $3,375.5, after assuming they set aside 8% for retirement. C5: Historically Safe Investments The 7% CAGR (compounded annual growth rate) for the S&P 500 is the average. This includes both the great years like 1998 and the bad years like 2008. It's the average. Since these stocks are remarkably safe over time, they are safer here than having government mess with it. Politicians have taken hundreds of billions of dollars from the Social Security trust fund to pay for things like the wars in Iraq and Afghanistan, and other projects. With this huge inflow of wealth to the U.S. government, it is likely to be squandered and used for other things. This reduces retirement security for regular Americans. ------------------------------------------------------------------------------------------------------------------------------------------ ----- Health Care in Retirement For secure health care during retirement, health insurance retirement accounts (HIRAs) are good options to use. Let's say workers put 2% into their personal account. These funds are invested as to how the worker chooses. We will assume that the return of 7% is used again. After 65, funds are annuitizied, securities are liquidated, and a fixed lump sum is deposited into the workers individual HSA annually, which makes personal responsibility continue to lower costs. The aspect of liquidating assets is completely voluntary. Assuming $43,000 annually; (43,000 x 0.02 = $860) Total = 860 x [1.0736 - 1] - 860 [.07] = $ 127,205.58, or $10,600 a year. As we can see, seniors will have health retirement security they need if this proposal was adopted by voluntary individuals. These funds would optimally supplement their health savings account, which would provide health care security to those in retirement. Conclusion Individuals should be able to have personal accounts to replace entitlements. People will have secure retirement, with high rates of return generated by the stock market. In fact, using just the average return from the S&P 500 would show that personal accounts would dramatically increase wealth for retirees, improve their security, while creating broad prosperity for Americans who are free to choose to invest and save their money where they wish. Without entitlements, we would have a more limited government, with a lower public debt. Personal responsibility would replace Washington's transfers of wealth, that harm the poor by robbing them of large chunks of their income. Ultimately, personal accounts ensure retirement security, and enhances and protects economic liberty. Job creation, and increased investment from businesses and individuals alike makes the economy grow, generating over 11.5 milllion new jobs while improving living standards, and increasing take home pay. Limited government reduces coercion, and a growing economy helps America flourish. It's fair that you own your money because you earned it. You have the liberty to choose how much, and where you invest your money. You have the responsibility for yourself, and to make sure you have a good retirement balance. You have the opportunity to make yourself wealthy in your retirement and help your kids. If you had a stock that had a negative return, or didn't outpace inflation, you would dump it. Then why don't we dump our entitlement programs? Sources: [1] http://tinyurl.com... [2] http://tinyurl.com... [3] http://tinyurl.com... [4] http://www.getamericaworking.org... [5] http://usdebtclock.org...