A New Jersey financial advisor and university lecturer claims he has developed a breakthrough strategy that will eliminate poverty for retirees and senior citizens struggling to survive on fixed incomes.
Ric Edelman, who lectures at Rowan University in Glassboro, N.J., even says his plan can eliminate poverty among retirees "for all future generations of Americans."
The proposal is based on a concept involving the U.S. Treasury Department issuing and selling a new category of savings bonds - with a single bond issued for every child born in the United States each year. The funds raised from those bond sales - about 4 million babies are born in the U.S. each year - would be managed under a framework to be established by Congress, according to a press release issued by Rowan University.
Edelman has named the proposed retirement-security initiative RISE - for Retirement Income Security for Everyone. The plan calls for RISE Bonds to be sold at $5,884 each - and to be redeemed after 20 years. The redeemed funds would then be managed under a Congress-established asset management framework or agency - with all administrative and redemption costs self-funded by the program. Monthly income distributions for each American covered under the progran would begin at age 70 - allowing for almost double the amount of time for the retirement-security assets to grow than most pension, 401(k), IRA and other retirement savings vehicles.
"The key to RISE is seven decades of compound growth," Edelman said. "Benjamin Franklin gave money to the cities of Boston and Philadelphia ... with the stipulation that they not over touch the money for 100 years. His foresight produced huge financial support to both cities."
Edelman says each person coverered under the program would receive enough annual income from RISE in their retirement years to place them above the median income of all U.S. households. Based on simple calculations, it appears the annual U.S. Treasury sale of RISE bonds - if the program ever came to fruition - would total more than $23 billion. On a daily basis, the average trading volume of all U.S. Treasury instruments bought and sold is over $547 billion.
"RISE eliminates poverty in retirement for all future generations of Americans," said Edelman, who is also the founder of Edelman Financial Engines - an independent financial planning and investment management firm.
"A one-time funding of $5,884 at birth is enough to give each retiree $120,000 in annual income starting at age 70," Edelman said, noting that the power of compounding for that period of time would dwarf the asset growth and income potential from a typical 401(k) account. "That's because workers only save for three or four decades. By letting money grow for seven decades, RISE unleashes the true long-term power of compounding."
Since 1970, incomes for the top 5 percent of households have more than doubled, while incomes for the bottom fifth of households fell 15 percent, according to the Pew Research Center. As a result, upper-income families by 2016 had 75 times more wealth than the lowest-income families – up from 28 times in 1983.
"RISE is an important plan to supplement Social Security for future generations to ensure safe and secure retirements, especially for lower income Americans, by starting to fund retirement at birth," said James Lockhart III, Former Deputy Commissioner and Chief Operating Officer of the Social Security Administration, in the official Rowan University announcement. "The funding mechanism is a very innovative approach that should be explored."
Other experts on retirement security and asset growth for retirees who are lining up behind Edelman's proposal include:
- Laura L. Carstensen, Ph.D., the Fairleigh S. Dickinson Jr. Professor in Public Policy and Director of Stanford University's Center on Longevity.
- Paul Irving, Chairman of the Milken Institute Center for the Future of Aging.
- Ihsan Isik, Ph.D., Professor of International Banking and Finance in Rowan University's William G. Rohrer College of Business.
- Jason Grumet, Founder and President of the Bipartisan Policy Center.
"As the country grapples with the twin challenges of retirement security and inequality, innovative ideas like RISE are needed to address retirement security for all," said Grumet