Guaranteed Social Security Benefits: Make It So

The comically complicated PSA (Personal Savings Account) legislation bouncing
around Congress will raise taxes, increase investment risk, and expand the size
of government. Let's stop applying Band-Aids to spouting arteries. We are
looking for a guaranteed retirement benefit program, and organizations capable
of providing one. Additionally, we want the new program to reduce taxes, create
jobs, boost the economy, cut prices, and increase salaries. Difficult? Not
really.

This is the conceptual outline of a five-year implantation plan, a starting
point for the brainstorming needed to develop the nitty-gritty details, rules,
regulations, laws, and agencies. All that is needed is the will to change things
productively. Politicians like to debate changes to determine why new ideas
can't be implemented. Here's a plan that must be implemented. Have a listen,
throw out an incumbent, and protect your future.

Guaranteed benefit programs have been around for over 100 years, and millions of
people throughout the world enjoy the benefits they provide. Here's how they do
it. Every month, they deposit money into a trustee-managed investment account.
The money avoids the stock market (for the most part), index funds, commodities,
or MLM-like derivatives and is carefully invested in high quality debt
securities, many privately placed for better yields.

All earnings are reinvested in similar securities, and the fund eventually
produces more in earnings than the participating investors contribute; the
trustee manages the portfolio. At retirement, the deposits stop and the
guaranteed benefits begin. The benefit is guaranteed for life--- extraordinary
concept, older and wiser than any living congressman or presidential candidate.

What if, instead of donating 7.6% of your salary (15.3% if you are self
employed) to support the war de jour: (a) you could choose to deposit from 3% to
5% of your salary in a guaranteed retirement program maturing anytime after age
60, (b) the lifetime benefit is totally income tax free, and (c) your employer
uses his savings to either create jobs, raise non-executive salaries, reduce
prices, or increase shareholder dividends. Interested?

The SSRIA (Social Security Retirement Income Annuity) is a new and improved
version of the ancient Deferred Fixed Annuity--- a boring but guaranteed
fixed-amount-only retirement vehicle. (Wrong, I don't sell annuities--- they
just happen to be the perfect Social Security problem solver.) There are a bunch
of new wrinkles: (1) The minimum contribution is mandated for all employed
persons, but anyone with a Social Security number can have a SSRIA.

(2) Qualified (15 years of Fixed Annuity experience) SSRIA providors are
assigned to participants randomly by SS#--- only one per participant, per
lifetime, please. Since the "qualified-by-qualified-people" providor companies
have no acquisition, retention, or advertising expenses, there are no sales
commissions; administrative expenses and investment management fees are capped
at .5% of the total fund Working Capital.

(3) All SSRIA contracts, regardless of provider, will contain the same terms,
interest guarantees, retirement benefit choices, and pre-retirement death
benefits, thus eliminating any incentives for internal fraud and manipulation of
statistics.

(4) Qualified providers will establish separate tax exempt, "mutual"
subsidiaries to manage and control operations, assuring that profits are
distributed to contract holders. Profits are allocated 50% to active contract
holders and 50% to a health insurance trust fund for retired participants
(HITF). (5) All providers will use the same mortality, investment earnings, and
expense assumptions in their annuity benefit calculations, and only Life and
Life + One Annuities are available. (6) Benefit payments will be jointly
guaranteed by the parent companies and the Federal Pension Benefit Guarantee
Corporation. Parent Company income taxes would be reduced by 50%.

Implementation would be completed over a five-year period, and interpreted with
an "intent of the law" bias:

In Year One, the Federal Government would purchase single premium SSRIAs for all
active Social Security recipients--- hey, they squandered the money. Also in
year one: (1) all employee and employer contributions would be cut by 25% (the
first of four such annual cuts) and deposited to individual SSRIAs. (2) All
Federal, State and Local income taxes on SSRIA payments would be declared
illegal and forever prohibited. (3) A private company would be chartered to
audit the disposition of corporate tax savings within all public companies and
private companies employing 10 or more persons 18 months before enactment.

In Years Two through whenever, the Federal Government would add to retiring
persons SSRIAs to bring the annuity benefit to the level guaranteed by the OASI
plus COLAs. Once an equalization level is achieved, federal responsibility would
cease for that retiree.

In Years Three through Five, all Federal, State and Local Income taxes on all
forms of private retirement accounts (IRA, 401(k), 403(b), etc.) would be
reduced by one third per year, and would be declared forever illegal at the end
of year Five. A Federal Sales Tax of 1% or 2% (on all final-product-sales, not a
VAT) could be enacted after the second year's cut. From Year Three forward,
SSRIA holders would be able to view their projected monthly benefit at various
retirement ages, based on contract provisions and their deposit and earnings
history.

By the end of the Year Five: (1) Employers would have no Social Security tax
responsibilities, but would be responsible for either employing more people,
reducing their product prices, raising non-executive salaries not subject to the
minimum wage, or paying higher dividends to shareholders. Any manipulations of
their operations or executive compensation packages clearly intended to
circumvent the intent of these reforms would be fined appropriately within the
Board of Directors, senior officers, and legal council of the Company---
personally, and in each capacity.

That's right, if a senior officer is also on the Board, and responsible for
controlling jobs, product prices, or dividends, he or she would be personally
responsible for three separate fines. (2) Employees would select their level of
salary deduction for year six; the election can be changed once in any
twelve-month period. No employee can contribute more than the maximum 5% of
salary to an SSRIA.

Of course there are a lot of ifs, ands, and buts in here, but it is a clearly
doable program within an established professional infrastructure. It will
increase jobs, reduce taxes, boost the economy and reduce the role of
government--- in 50,000 less words and 25 fewer years than any approach even
being considered in Congress.

Make it so--- yeah, you!


Steve Selengut
http://www.sancoservices.com
http://www.kiawahgolfinvestmentseminars.com
Professional Portfolio Management since 1979
Author of: "The Brainwashing of the American Investor: The Book that Wall Street
Does Not Want YOU to Read", and "A Millionaire's Secret Investment Strategy"



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