IPI Publication Press Release
IPI Ideas
Related Publication Title:
Retirement Savings Accounts as Safe as Your Bank
Released by Sonia Hoffman on 07/19/2001
IPI Ideas
Related Publication Title:
Retirement Savings Accounts as Safe as Your Bank
Released by Sonia Hoffman on 07/19/2001
Full Text
Press Release (07/19/2001)
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Retirement Savings Accounts as Safe as Your Bank
For IMMEDIATE RELEASE
Thursday, July 19, 2001
Contact: Sonia Hoffman, (972) 874.5139 or shoffman@ipi.org
Dallas, TX: Imagine a retirement account as safe as your bank account, where employees bear virtually no risk because they get their interest whether the stock market goes up or down. “Hog posh,” you say? Well, it’s definitely not your father’s Social Security.
“Moving from an ‘IRA model’ to a ‘banking model’, or from an ‘investing model’ to a ‘savings model’, would ensure a better return on workers’ savings than Social Security and avoid risks associated with the stock market,“ says Dr. Merrill Matthews in a new IPI Ideas for the Institute for Policy Innovation (IPI). “This is what we call a ‘Retirement Savings Account,’ or a RSA.”
Folks in several Texas counties, including Galveston, Matagorda and Brazoria, already enjoy the benefits of a RSA system. When these counties left the Social Security system twenty years ago, they established their own retirement plan where a financial institution borrows participants’ money at a guaranteed interest rate.
Those rates vary from 5 percent to 15.5 percent, but average in the 7.5 percent to 8 percent range. But even at 5 percent growth, contributors can expect about twice as much retirement income than they could expect from Social Security. For example:
· A low-income worker ($17,124) retiring at age 65 would get $782 per month from Social Security, but $1,285 from the Texas counties.
· A high-income worker ($51,263) at 65 will get $1,540 from Social Security versus $3,846 from the counties.
And like banks, insurers and other types of financial institutions, a RSA system would operate under a similar government regulatory framework.
“For years the debate over reforming Social Security has centered on an IRA model, in which people’s contributions rise or fall with the stock market,” continues Matthews. “However, stock market volatility and political posturing may make that option politically impossible.”
“A model that is as safe as your bank may be the only viable political option.”
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