Billionaire Bill Ackman, chief executive of Pershing Square Capital Management hedge fund, claims that this plan would give every single American the means to retire a millionaire while, at the same time, saving capitalism and making it truly the American dream.
In an article for the New York Times DealBook section, titled “How to Fix America”, Ackman wrote that the U.S. Government should open a retirement account of $6,750 for every child born.
Under Ackman’s plan, succinctly dubbed called “Birthright,” each child born in the U.S. would receive the money in a government-funded basket of index funds that could only be tapped into upon retirement.
It’s an amazingly brilliant, yet simple solution to what ails this country. Unless some apocalyptic event happens and the market crashes for the full span of birth to retirement—at which point everyone would have other things to worry about anyway.
Assuming 8% returns over 65 years from birth to retirement, that total would end up being over $1 million and possibly as much as $2 million, by the age of 74. He calculated that if the current birthrate in the country remains steady, it would cost the government about $26 billion a year.
That’s $26 billion in free stocks well spent and full of economy-boosting consumer spending power.
“In addition to helping all Americans build wealth for retirement, Birthright would encourage greater financial literacy, and give all Americans the opportunity to participate in the success of capitalism,” Ackman wrote.
In an August note to the investors, Ackman said that steps need to be taken to close the increasing inequality gap in the name of saving capitalism.
“Americans that have no ownership in the success of capitalism, and who are suffering economically, are more motivated to turn toward socialism or other alternatives,” he said in the note.
If the Birthright proposal is accepted and implemented, that would be probably the only time when citizens wouldn’t mind the authorities’ oversight of their finances.
For now, though, retirement remains elusive and capitalism is at great risk.
Millennials and older Generation X are struggling under the weight of student loan debt, recession, self-funding their own retirements, and wage stagnation in the last decade.
Many of them think they’ll be working until they die. A third of millennials don’t think they’ll ever be able to retire, and a third regret the money they spent on college or house mortgage.
According to the National Institute on Retirement Security, some 66% of Americans between the ages of 21 and 32 have nothing saved for retirement.
It also suggests that 95% of Millennials aren’t saving enough for retirement, and just over one-third participate in employer-sponsored retirement plans.
A recent report from money manager United Income said that the current workforce will still play a key role in the American workforce–but not necessarily by choice.
Hikes in the Social Security retirement age, massive health-care costs, depleting savings, and high levels of personal debt have made it harder to retire. The upward trend is expected to continue, with the report estimating that 13 million Americans aged 65 or older will be in the labor force by 2024.
In the end, it appears the answer to capitalism is a resounding ‘share the wealth’.