The three major risks of retirement plans are a stock market collapse, outliving money and steep inflation. A little common sense is all that is required to understand The College Plan approach to solving this problem. Think of your retirement as if its has three buckets to fill, one for home equity to fight inflation, a second for guaranteed income to soften the blow of a market collapse and insure monthly income for life and a third bucket to build your nest egg.
The Democratic led House Education and Labor Committee is considering a much more radical approach. Their plan takes over your retirement plan starting with your account balance as of August before the stock market crash. All workers would receive a $600 annual inflation-adjusted subsidy from the government but would be required to invest 5% of their pay into a guaranteed retirement account administered by the Social Security Administration. The money in turn would be invested into special government bonds that would pay 3% a year adjusted for inflation.
This plan would build the guaranteed income bucket. The current proposal would however, eliminate other tax incentives which would make it more difficult to build your nest egg. Home equity is not included as part of the plan.
Homer Sweeney
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