The Plan for Social Safety
Based mostly on the marketing campaign’s web site, Laffey’s proposals to deal with Social Safety’s funding woes are primarily based within the plan Kotlikoff has been advocating for years. The essential concept is to reset the retirement contract that America makes with its residents. The plan contains scrapping Social Safety and beginning a essentially new system primarily based on government-managed particular person funding accounts.
To try this, Kotlikoff recommends freezing the present Social Safety accounts of these, for instance, at present at age 40. When these staff retire, they might get Social Safety advantages primarily based on their earnings as much as age 40.
Kotlikoff’s plan would typically require staff to put 10% of their pay into their private retirement account, typically to be matched by employers. The federal government would make progressive matching contributions on behalf of the poor or unemployed, he says.
These accounts would then be government-invested “by a pc in a worldwide index fund of shares, bonds and actual property funding trusts” of main markets. Everybody would get the identical price of return, and the federal government would assure a return on contributions.
Between ages 57 and 67, every beginning cohort’s balances can be used to buy Treasury inflation-protected securities (TIPS). In flip, every cohort’s TIPS belongings can be used to pay for inflation-indexed life annuities that start at 62 and are totally phased in by 67.
If an individual dies earlier than 67, their heirs obtain the stability not but transformed to TIPS.
“In brief, our legislators have constructed a fiscal monster,” Kotlikoff lately informed ThinkAdvisor. “Its financial harm can’t be eradicated piecemeal, for a easy motive. Every of our fiscal system’s packages contribute to all or many of the system’s issues. … In brief, all facets of the system must be reformed in unison.”
A Severe, Smart Candidate
In a brand new dialogue with ThinkAdvisor following the marketing campaign’s announcement, Kotlikoff mentioned he’s happy to be contributing to a Republican presidential marketing campaign that’s “really in regards to the points as a substitute of mendacity and title calling.”
“If individuals don’t find out about Steve’s full background, they need to actually look into it. He has had an incredible life journey, from rising up in critical poverty to graduating from Harvard Enterprise College and working a extremely profitable financial institution,” Kotlikoff mentioned. “As mayor, he did a lot to get his dwelling city of Cranston, Rhode Island, into higher fiscal form, and that’s expertise that the nation wants.”
Kotlikoff urged the monetary advisor neighborhood to fastidiously evaluate and contemplate the Laffey platform within the weeks and months forward, particularly the proposals concerning Social Safety and people associated to well being care and tax reform.
“We don’t agree on all of the social points, however Steve is a critical, wise individual with a mature and grown-up perspective, and a conviction to really tackle issues,” Kotlikoff mentioned.
(Pictured: Economist Laurence Kotlikoff)