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Terry Savage Headshot

MyRAs -- the New Social Security?

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The president has proposed a new type of retirement savings account. It would be an individual account, guaranteed by the government, offered through employers and available to lower income workers to give them security in retirement.

What a creative idea! It sounds so familiar. Wait... we already have that account: It's called SOCIAL SECURITY!

In fact, that's exactly how Social Security was promoted when it was enacted in 1935.

It was a "voluntary" account, thus the term FICA, Federal Insurance Contributions Act.

And it was an individual account. Remember the "shoebox" in Baltimore with your SS number on it?

By the late 1980s, the growing surpluses in the main Social Security "trust fund" (which were meant for baby boomer retirement) were such a tempting target that they were combined into the government's total budget. Thus, our current annual budget deficits consume the trust fund, though its assets are reported separately.

And Social Security was to be a tax-free return of your contributions. That lasted until the 1983 "reforms" made up to 85 percent of your payout taxable, depending on earnings.

And employers would "help" by collecting these "contributions" and passing them on to the government, which would hold them in a special type of bond. (The current proposal calls for a R-bond. How different can that be from the current $2.7 trillion in "special purpose" treasury IOUs now stuffed into the Social Security trust fund?)

And how long will it be before employers are asked to make "matching contributions" to this fund -- much as they make matching 7.65 percent "contributions" to your current Social Security "account?"

And, of course, now everyone agrees that this new retirement plan won't work unless "everybody is auto-enrolled." So much for voluntary!

So, I think we've seen this movie before -- back in 1935. And how will that work out for those just retiring?

In offering his new "MyRa" proposal, the President said: "MyRA guarantees a decent return, with no risk of losing what you put in."

Yes, and you can keep your doctor too.

Fool me once, shame on you. Fool me twice, shame on the voters! That's the Savage Truth!