Introducing Birth Bonds to Help Overcome Bankruptcy at Birth
Have you ever done a full accounting of the liabilities you and your family will incur over a century of life? Very few people have. Maybe you don't want to. Or maybe you don't know how. Either way, not doing this in today's economic climate will keep you in that state of bankruptcy you were born into for your entire century of life.
Bankrupt at birth occurs at the precise moment you enter the world and the clock starts ticking for your century of life. Adding up over the next one hundred years are the costs of all the obligations that your presence in this world requires of you. These are your life's liabilities. They can be timed. They can be quantified. And, if you can't pay them off the moment you arrive to start your century of life, then, you have the original sin of bankrupt at birth.
One of the largest and most significant liabilities is longevity risk - not having enough money to live out your life after you retire.This obligation for some one born today, assuming their lifestyle is based on today's median annual family income of $60,000, is over $8.0 million (assuming 3% inflation) by the time they reach age 65 for a 35 year retirement. This requires annual contributions starting at age 20 of more than $26,000 per year for the next 45 years (assuming 7% returns).
Even if you're very young, say in your twenties, the annual amount you need to save to finance a comfortable retirement life style would consume most of your annual income. As a result you have a conflict over priorities in life, such a purchasing a home and paying for children's college tuition.
The shift of the pension funding liability from employer to employee puts most average citizens in a bind for how to allocate resources between the present and the future. The optimal solution would be to start addressing the retirement funding problem right at birth when the cost is lowest. And it needs to be done with the government as a partner because it has a vested interest in seeing that a retiree has the financial resources to continue living independently without needing substantial government assistance.
Here's the idea. Using the same concept as what's behind the individual retirement account, the government should offer "birth bonds". These would be zero-coupon bonds purchased from the government by a parent or grand parent for the benefit of their children or grand children. The purchase of the bonds would be tax deductible at that time, just like the contribution to the standard IRA. The issue amounts would be a minimum of $2,000 up to $5,000 per year per child for the first 5 years after birth. Perhaps a catch up purchase for any child under the age of 10 could be considered. At age 65 the bonds mature and the proceeds would be used to purchase a mandatory annuity for the benefit of the children. The annuity income would be fully taxable when paid out to the child, but would grow tax free until that time.
This accomplishes three objectives: (1) The federal and state treasuries gets an immediate influx of cash when their birth bonds are bought; (2) An asset will be available to the child later in their life to supplement their retirement, social security, to finance long term care or other medical requirements and to meet other late in life obligations; and (3) the federal and state governments get an assured future stream of income from the taxes paid out on the benefits.
Here is a program that is not an entitlement, gives the government a new source of cash now, has a relatively modest short term tax break for the middle class, guarantees a flow of future tax revenue to the government, is not equity based so market performance is not an issue, may help alleviate funding concerns about Social Security and help provide more security for future generations.
If you believe in this idea, please forward this article to anyone you think might champion the cause. Today's systemic financial problems requires many different ideas to be considered. Here is one that I have.
Thomas Warren is a Certified Financial Planner(R) practitioner. He resides in Oceanside, N.Y.
Copyright 2010, Thomas Warren CFP
- Preparing For Bankruptcy - Income Makes a Difference When Filing For Chapter 7 Bankruptcy
- Automatic Stay in Bankruptcy - How Long Does the Automatic Stay Last?
- Debt Settlement Versus Bankruptcy - Which is Better?
- Bankruptcy - Learn What Bankruptcy Really is and Help Your Debt Case With Debt Relief
- Liens in Bankruptcy Cases
- What to Expect During Your Bankruptcy Filing
- Bankruptcy and Buying a Home Tips
- Green Shoots in the Economy - Bankruptcy Increases by 100
- Reasons For a Corporation to Consider Filing For Bankruptcy
- How Long Does Bankruptcy Affect Your Life?
- San Bernardino Bankruptcy Lawyers - Helping You Through One of Life's Toughest Times
- Creditor Exposure in Retail Bankruptcies
- Ohio Chapter 13 - Which One Should I File?
- Chapter 7 Bankruptcy - Am I a Bad Person For Filing Bankruptcy?
- Chapter 7 Bankruptcy - Common Questions About Filing Bankruptcy
For 2nd time, Ohio woman gives birth in vehicle
Franzen gives birth to a literary extravaganza / 4
Dadabhai Naoroji remembered on his 185th birth anniversary
Kristen Stewart talks "intense" Twilight birth scene
AceShowbiz (blog) Kristen Stewart talks "intense" Twilight birth scene Flecking Records (blog) Everyone is wondering what the birth scene will be like in the next Twilight flick, in which Kristen Stewart's character Bella gives birth to baby Renesmee ... Want Intensified Robert Pattinson and Kristen Stewart 'Breaking Dawn' Scenes? Robert Pattinson And Kristen Stewart and a Vampire C-Section'Birth tourism' a tiny portion of immigrant babies
Central Florida News 13 ' Birth tourism' a tiny portion of immigrant babies The Associated Press They say women like Garcia are taking advantage of the constitutional amendment and paint a picture of pregnant women rushing across the border to give ... ' Birth tourism' a tiny portion of immigrant babies ' Birth tourism' a tiny portion of immigrant babiesWoman accused of abandoning baby in trash bin after giving birth
Army judge denies request for Obama birth records
msnbc.com Army judge denies request for Obama birth records KPUA By AP FORT MEADE, Md. (AP) A military judge in Maryland has ruled that President Barack Obama's birth certificate is irrelevant in the case of an Army ... Judge removes 'birther' elements from Army doc's court martial Army 'birther' loses ruling on evidence Birther Debate: Retired General, a Fox News Analyst, Questions Obama's Legitimacy -Breaking Dawn Birth Scene Will Be Very Intense
Marie Claire.co.uk Breaking Dawn Birth Scene Will Be Very Intense Real Bollywood (blog) September 3, 2010: The birth scene for Bella's child in the upcoming movie 'Breaking Dawn' is going to be as intense as described in the book. For all the ... 'Breaking Dawn' Birth Scene As 'Intense' As Book Kristen Stewart playing Bella's Breaking Dawn violent birth scenes as written Kristen Stewart's Breaking Dawn Birth Scene Won't Be Toned Down - -For 2nd time, Ohio woman gives birth in vehicle
KOMO News For 2nd time, Ohio woman gives birth in vehicle The Associated Press BETHEL, Ohio For a second time, an Ohio woman has given birth to a baby who couldn't wait and arrived on the drive to the hospital. Christina Schuler's 8 ... Bethel Woman Gives Birth En Route ... Again Clermont County Mom Gives Birth in Car For 2nd TimeШестая часть Kingdom Hearts обойдет стороной PSP Go
Lenta.ru Шестая часть Kingdom Hearts обойдет стороной PSP Go Lenta.ru Игра Kingdom Hearts: Birth by Sleep выйдет только на UMD, сообщает 1UP. Разработчики Square Enix пока не планируют выпускать шестую часть приключенческой RPG через сетевую дистрибуцию на PSP Go. Это первый крупный проект, который не появится на последней модели портативной консоли Sony. ...