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Retirement Planning > Social Security

Ric Edelman Unveils Novel Social Security Supplement Plan

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Famed advisor Ric Edelman on Wednesday unveiled his companion plan to supplement Social Security, the Tomorrow’s Retirement for the U.S. Today Fund for America (T.R.U.S.T. Fund for America).

“It’s absolutely impossible to overstate the incredible importance of Social Security on our nation,” Edelman, founder and chairman of Edelman Financial Services, said at a Wednesday press briefing at The National Press Club in Washington to announce the plan.  

Under Edelman’s T.R.U.S.T Fund for America, the government would set aside a one-time amount of $7,000 for each child born in the U.S. (approximately 4 million children are born annually), and repeat this for new children annually for the next 35 years.

(Related: Advising Clients on Social Security: Talking Points, Part 1)

The money would be invested in a portfolio and managed by a “blue-ribbon” panel of experts appointed by the president and Congress.

After 35 years, Edelman explained, “the government would get back its initial outlay, plus inflation, and use the proceeds to fund the program for children born during the next 35-year cycle.”

The typical American worker, he said, will pay $605,038 in Social Security taxes by age 70. However, a “single deposit of just $7,000 to the T.R.U.S.T for America would produce identical retirement benefits.”

The program would cost the federal government $27.5 billion in the first year, he said. After 35 years, it would become permanently self-funding—a total cost of less than $1 trillion.

He compared his plan to the Securing Our Financial Future plan from June 2016 floated by the Bipartisan Policy Center’s Commission on Retirement Security, which he said would “cost a total of $12.5 trillion — $7.1 trillion in additional taxes and $5.4 trillion in benefits cuts.”

Shai Akabas, director of fiscal policy at BPC, told ThinkAdvisor on Wednesday that while he had not reviewed Edelman’s plan, BPC’s proposal is a “permanent” solution to fixing Social Security that has been scored by Steve Goss, chief actuary at the Social Security Administration. Goss “found that our proposal was sustainably solvent, and that if this proposal were enacted, it would be sustainable, not only for 75 years but even beyond that window.”

Retirement planning, Edelman said, is one of the most pressing issues facing investors. “We don’t have public policy that facilitates the ability for most Americans to save for the future,” he said. “Only half of Americans have access to a workplace retirement plan. It’s the worst it’s been since 1979.”

Forty-five million people, he continued, “have no retirement plan at work at all.”

The average household has only $120,000 in retirement accounts, he said. “If you extrapolate that into monthly income, that’s only enough to produce about $400 per month. This is a real crisis.”

This is why Social Security “is so vitally important to us,” Edelman said. “Forty-three million Americans are currently receiving Social Security retirement benefits; the average check, though, is only $1,300.” That amount still represents about 40% of the average retirees’ income, he noted.

By 2033, according to the Congressional Budget Office, the Social Security Trust Fund will be completely depleted. “That means by 2031, retiree benefits are going to have to be cut by about a third. So that average check of $1,300 will get cut to $800 if nothing is done.”

Edelman stressed that his plan is “a companion to Social Security–to take the pressure off of Social Security if the benefits decrease.”

While Edelman said that he’s shared his plan with “several economists and folks on Capitol Hill to gauge the math” and assess whether the plan is “realistic,” he has not attempted to evaluate the plan’s “political fortunes,” he said.

“There are a lot of details that have to be worked out in the proposal,” he said. “My hope is that both sides of the political spectrum find this [plan] offers something for everybody,” adding that he’s “ready and willing to engage with Congress and the administration” about it. 

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