Social Security cannot afford to pay all of the benefits it has promised. Beginning in 2017, it will run cash deficits that get bigger every year.
Four senators, including John Corzine (D-NJ) and Charles Schumer (D-NY), recently introduced the ASPIRE Act of 2005. It would permit after-tax Roth IRA-style contributions to KIDS accounts for minors of up to $1000 per year. This money would grow tax-free until used for college or to start saving for retirement. It’s interesting that Senators Corzine and Schumer believe in the power of compound interest for children, just not their older siblings starting out in the workforce. A KIDS account comprised of half stocks and half bonds would accumulate close to $40,000 by the child’s 18th birthday. Compound interest works. Corzine and Schumer admit it. Why can’t younger workers use compound interest to get a better rate of return in Social Security?
Social Security has a problem, and we need to fix it. Personal accounts are the solution.
Corzine and Schumer Believe in Compound Interest for Kids, Not Younger Workers