How We Can Make Every American Citizen Wealthy in One Generation

The average Social Security monthly check is about $1400. That's $16,800 per year. Let's round it down to 16K.

Rather than focus on government pay-outs of $16,000 a year at the end of someone's life, maybe for five, ten, or thirty years, let's put that money to work at the start of someone's life.

For every baby born to legal American citizens (or a mother legitimately in process of becoming a citizen), we give $30,000 to the baby.

This money is broken up into three individual tax-deferred savings accounts.

One account is a normal IRA, and can't be touched (without hefty penalties) until the person reaches age 60.

The second account is an Education Payment Plan (EPP). The funds are untouchable until age 18, and if a degree is not earned from an accredited institution by age 28, 3/4s of the fund is returned to the government, and the remaining quarter can be rolled over into either of the other two accounts. If a two-year degree is earned, the government return is only half. If the person dies prior to 28, all the funds return to the government.

And the third is a Health Savings Plan (HSP). The funds are untouchable prior to age 24 (the child is hopefully on the parents' insurance until then), at which time the funds can be used to pay insurance premiums or qualified medical expenses. In the case of death prior to age 60, half the funds are accessible to the surviving family, and half are returned to the government. After 60, one-quarter goes to the government, and the survivors keep 75%.

Withdrawals after maturation dates are subject to normal taxation.

Assuming an average rate of interest on each account of 6% with no additional contributions being made, the EPP would have about $25,500 in the account. Maybe not enough to pay completely for college, but it'd help a lot.

Same situation with the HSP, the person would have about $40,500. Again, not much considering how expensive medicine and insurance premiums are, but a help.

And the same conditions with the IRA nets the retiree nearly $330,000. Not a huge nest egg, but for doing nothing, it ain't bad.

Now, let's take those same accounts, and have the person add $10 to each account every month (that's $30 a month). The EPP jumps to $32,000; the HSP goes to $46,500; and the IRA goes to $394,000.

But let's look at six other scenarios.

1 - An interest rate of 8% instead of 6%.

EPP = $40,000
HSP = $63,500
IRA = $1,000,000 (that's one million!)

2 - An interest rate of 6% and $100/month contributions

EPP = $65,500
HSP = $101,500
IRA = $970,000

3 - An interest rate of 8% and $100/month contributions

EPP = $85,000
HSP = $143,500
IRA = $2,500,000

4 - An initial investment of $60,000 instead of $30K, with 6% and $10/month

EPP = 61,000
HSP = $87,000
IRA = $724,000

5 - $60K, 6%, $100/month contributions

EPP = $94,000
HSP = $142,000
IRA = $1,300,000

6 - $60K, 8%, $100/month

EPP = $125,000
HSP = $207,000
IRA = $3,500,000

All this, for the cost of two (or four years in the case of #s 4, 5, and 6) of an average Social Security payout. The go-getters would be more aggressive with their monthly contributions (for example, I'm paying quite a bit more to my monthly IRA - this plan would have saved me a lot!), but even the laziest do-nothings would still wind up with a nice little retirement package ($330K would pay out $2000 a month for almost 14 years (taxed, so maybe back down to $1400/month take-home), even without the continued growth of the fund as it was paid out - so even longer considering that growth). Plus, much of the initial investment by the government would be recouped by the early deaths and non-college grads.

This would not replace all the social services needed, but it'd make a huge dent, and perhaps more importantly, reduce the governmental Nanny state.

Maybe I'm missing something, but it seems to me that the numbers work.