March 10, 2024

Poverty is isolated in the private sector.  Public-sector workers’ salaries are almost twice that of private-sector workers, and their pensions are enormous.  This is not meant to begrudge public workers, but they would do well to sympathize with their private-sector brethren, since about eighty-five percent of their pension money is paid by private-sector workers and their employers.  The fiscal health of public pensions is dependent upon wealth of the private sector.

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So what is the ladder out of poverty?  The Dow Jones average of equities on January 1, 1975 was 632.  Forty-five years later, on January 1, 2020, that 632 had grown to 28,538.

What if we had added an ever-increasing investment, each year, in addition to $632?  What if we and our employer added, each year, our 15.3-percent Social Security–Medicare tax into our own private equity fund?  The compound savings is staggering.

Had a low-income worker with a lifetime-average taxable income of only $8.10 per hour paid the tax into his own equity fund that tracked with the Dow, and left it unattended, he would have retired with $1,000,258.

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A chart proving this is in the book referenced below (on p. 51).  The chart uses December 31 annual Dow Jones averages, precise to the dollar.  The numbers are not arguable.

The worker need not know what a stock is.  He can leave the money in an equity fund and forget about it.  Note that the stock market gains included the 2008 financial crisis correction.

Low-income workers would retire as millionaires.  Not only would privatized retirement accounts mitigate poverty, but they would nearly eliminate it.

The next chart reveals a more interesting result.  During that pensioner’s retirement years, he can spend $78,840 per year up to age 85.  What is interesting is that if that pensioner died at life expectancy (age 79), his children would inherit $419,813.

Our generational wealth transfer disintegrates because of Social Security.  Privatizing our retirement funds will reverse this poverty-producing system.  If the children of a low-income worker can inherit $419,813, wealth will certainly grow from generation to generation.

The Social Security Administration is taxing Peter to pay Paul.  Critics are correct: Social Security is a Ponzi scheme.  Your account balance drops to zero every year, and nothing is invested.