Program called KidSave? $2000 loan from SS at birth and more

[The Straight Story]

SPEECH OF
HON. JERRY WELLER
OF ILLINOIS
IN THE HOUSE OF REPRESENTATIVES
FRIDAY, JANUARY 5, 2007

* Mr. WELLER of Illinois. Madam Speaker, commentators on the political left and right agree about one thing: There are too many political disagreements in Washington, D.C. Of course, the best way to change that would be for those of us who are lawmakers to find common ground and begin passing legislation that virtually everyone can agree on.

* Where to begin? How about with a program that has the support of moderates, liberals, and even the conservative Heritage Foundation? That program is KidSave.

* This common-sense program would allow every American child--regardless of parental income--to save up tens of thousands of dollars for retirement.

* KidSave is fairly simple. If it was in effect today, at birth every child would receive a loan of $2,000 from the Social Security Administration. The initial amount would be linked to inflation, so it would increase slightly year to year. The money would be deposited into an account that couldn't be opened until the owner retires or dies.

* This account would be managed by the Thrift Savings Plan, the same plan that federal employees--including those of us in Congress--use to manage our retirement funds. Right now there are three low risk, low-cost options offered through the TSP: A government-bond fund, a corporate-bond fund and a stock index fund.

* The child's parents would decide which fund to deposit the initial investment in, and it would grow untapped for decades and decades. According to a study by the Heritage Foundation, the opportunity for growth is so great that, even if no money was ever added to the initial investment, that loan could still grow to $50,000 by the time the child reached retirement age.

* Parents and grandparents also could contribute additional money tax-free. They could add as much as $500 per year every year until the child turned 19, and that money could be diverted from their own retirement plans. That's an additional $9,500, all of it being compounded year after year until retirement.

* This is one of those rare Washington programs with the power to change everyone's outlook for the better.

* Wealthy people have long taken advantage of long-term investments--indeed, families such as the Rockefellers and Vanderbilts have lived for decades off the money earned by their forefathers. Today, thousands of middle-class grandparents are opening education accounts for their newborn grandchildren.

* But KidSave would allow all children to enjoy the benefits of compound interest. Imagine an entire generation of working-class senior citizens with tens of thousands of dollars to spend as they wish. They'd be virtually guaranteed a secure retirement and could spend their newfound wealth on themselves or share it with their children and grandchildren.

* A portion of this money would be passed from generation to generation, either as gifts to grandchildren or through donations to churches or community groups. That would help build a more secure future for generations to come.

* Best of all, KidSave is a loan from Social Security, not a gift or a new government entitlement. That's one reason it enjoys such broad support. And it doesn't end up costing taxpayers anything. When the account owner reaches age 30--an age at which most people are well along in their working lives--the original loan would be repaid in five annual installments. The repayment amount would be linked to inflation, so an initial $2,000 loan would be returned to the government as, say, $3,500.


E27] GPO's PDF

* Lawmakers today are deadlocked over how to reform Social Security, how to improve welfare and how to close military bases, to name just three difficult issues.

* But we could get started on solving those if we'd first implement common-sense programs that enjoy wide support. KidSave seems like a good place to start building a better future for all Americans. That is why I am reintroducing for the 110th Congress, this important bill.

http://thomas.loc.gov/cgi-bin/query/D?r110:10:./temp/~r110XFtCzu::

[Mind_your_head]

1. I'll have to think about this for awhile.... but

True that "Wealthy people have long taken advantage of long-term investments" and "would allow all children to enjoy the benefits of compound interest". Too many people today don't understand or aren't used to the concept or the benefits of compound interest, imo. Anyway, to continue....

One part I don't understand is this one:

* Parents and grandparents also could contribute additional money tax-free. They could add as much as $500 per year every year until the child turned 19, and that money could be diverted from their own retirement plans. That's an additional $9,500, all of it being compounded year after year until retirement.

Assuming you've got 2 parents and 4 grandparents (some kids won't due to death, not sure how step-parents, step-grandparents, remarriage would work, etc.) but assuming 6....that's 6 who can contribute an additional $500 per year. 6 x $500 = $3,000/year. $3,000 x 19 years = $57,000. Where is this $9,500 number coming from??? :shrug:

Peace,
M_Y_H

on edit: oh wait....I think I see. $500 in TOTAL contributed per year. $500 x 19 years = $9500.

[The Straight Story]

2. Maybe the cap is $500/year additional funds

Other then that, I think you are right (and what about divorce, then new parents & grandparents, etc).

[mmonk]

3. My reform for social security would simply be to fund it

and quit trying to destroy it.

[antigop]

4. I'd be wary of ANYTHING supported by the Heritage Foundation

n/t