Life's Simple Pleasures

[Craig Knight <cbknightcpa@earthlink.net>]

Distinguished Panelists:

I have listened, read, and reviewed the various SS proposals
presented during the last several months (indeed, years).  All
of them introduce a level of complexity that may serve only to
alienate the public at large.  This is the greatest risk you
run as you pursue the laudable goal of engaging the American
people in a discussion of their retirement system.  For us,
the fear of retiring without sufficient income is very real
and very concerning.  You must take the time now, as part of
the formative process, to produce a proposal that is 1) simple
and understandable and 2) feasible and acceptable.

Current legislation and actuarial reports refer to actuarial
deficits, economic assumptions, and Trust Fund solvency.  The
public can understand these concepts, certainly.  However, we
also understand the following: Taxes paid this year and earnings
from investments earned this year provide retirement benefits
for the retired this year.  The same will hold true next year,
and so it will be in 2075.

As such, this "entitlement" program is aptly named.  It should,
therefore, be regarded first and foremost as a welfare program
with some additional benefits for those who shouldered a
greater burden for payments made in the past.  If reflected in
that respect as part of legislation, as it is understood
today by the laborer, then it is quite easy to "guarantee" the
welfare-type benefit, and allow the risk-benefit to float.

If an individual earned at the poverty rate during his or her
entire working life, this individual should be entitled to a
full retirement benefit of 100% of the poverty rate, when it the
comes to pass that the body betrays the mind.  If an individual
earned more, that individual should be allowed to risk some
excess earnings for reward in retirement.  Most of the plans you
have proposed recognize the merit of this approach, albeit often
in an awkward manner.

I would encourage each of you to consider this: Tax the
earnings of each worker at such a rate that guarantees a fully
funded pension benefit obligation of the poverty rate.  Tax the
remainder in a manner that allows each individual to control the
risk and reward of investments held for retirement.  This means a
true and bona fide "ownership" of the rights, responsibilities,
obligations, and, indeed, joy of participating in our free market
economy.

The present value of the lump-sum that would be required to fund
benefit obligations (under the current system) above and
beyond the poverty rate, while assuming a reasonable interest
rate for such GICs (perhaps T-Bill plus some percentage), should
be assessed for each worker currently covered.  This amount
should be added to their "PSA" account over the next several
years, and/or fully funded upon retirement (which will vary for
each worker).

In summary, the government should 1) plan to fund the portion of
its CURRENT pension benefit obligation that exceeds the poverty
rate, for currently covered workers, now 2) plan to fully fund
the present value of its pension benefit obligation at the
poverty rate for all workers now and in the future, and 3) allow
industry to provide IRA-like account structures for "excess"
retirement taxes that each worker can use to purchase any and
every available financial instrument available in the
marketplace.

My government's obligation should end when I am able to feed,
clothe, and shelter myself.  This holds just as true in
retirement, when I am unable to work, as it does during my
working year.  Anything beyond that is excessive socialism and
it is unwelcome.  Just keep it simple.