February 13, 2014

A TAD TOO MISERLY, BUT A START:

How Giving $1,000 to Every Baby in America Could Reduce Income Inequality (Norm Ornstein, February 12, 2014, National Journal)

It is called KidSave, and it was devised in the 1990s by then-Sen. Bob Kerrey of Nebraska, with then-Sen. Joe Lieberman as cosponsor. The first iteration of KidSave, in simple terms, was this: Each year, for every one of the 4 million newborns in America, the federal government would put $1,000 in a designated savings account. The payment would be financed by using 1 percent of annual payroll-tax revenues. Then, for the first five years of a child's life, the $500 child tax credit would be added to that account, with a subsidy for poor people who pay no income. The accounts would be administered the same way as the federal employees' Thrift Savings Plan, with three options--low-, medium-, and high-risk--using broad-based stock and bond funds. Under the initial KidSave proposal, the funds could not be withdrawn until age 65, when, through the miracle of compound interest, they would represent a hefty nest egg. At 5 percent annual growth, an individual would have almost $700,000.

The initial idea of KidSave was to provide a retirement supplement to Social Security, making it easier in some ways to reform Social Security to achieve fiscal solvency. But the concept can serve multiple purposes at a very small cost.

And the risk level needs to be automatically adjusted by age. Posted by at February 13, 2014 3:00 PM
  
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