I am not for expanding state entitlements, but as this one goes (in general concept) it is not a bad idea. And I would be into adding another $1,000 into a medical expense account.
I would propose this be funded from earned income credits. That instead of giving cash, they go into accounts like this and pay out on retirement.
I would propose this be funded from earned income credits. That instead of giving cash, they go into accounts like this and pay out on retirement.
Give 'em gold.
ReplyDeleteOr a stock portfolio.
A diversified stock mutual fund portfolio is what is being proposed.
DeleteSorry, yeah... it's a bad idea. And horrible math.
ReplyDelete"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,"
So $1000 + 500 * 5 = $3,500 to start, compounded over 60 years.
"At 5 percent annual growth," compounded quarterly just for something to use as we need that:
https://investor.gov/tools/calculators/compound-interest-calculator
Plug in those numbers (3500, 60 years, 5%, compounded 4/year) we get: $69,004.23 (in 2074 dollars).
Calculate inflation out of that to get 2014 dollars... lets assume it's comparable to the last 60 years.
http://www.bls.gov/data/inflation_calculator.htm
$1 in 1953 = $8.7250 today.
So $69,004.23 / 8.725 = $7,908.79.
Is $8,000 at retirement in today's dollars going to be the difference from rich or poor?
Given birth rates it's currently a 4 billion a year investment to give you an extra 8 grand at retirement.
Not $700,000 and especially not $700,000 in today's dollars.
Agreed, the math (even with compound interest) does not make sense. But, the concept of having such an account and paying into it over time would equal something like $700,000 even if the contributions were relatively modest (but constant).
Delete