No one needs a steady flow of income more than senior
citizens, except the Government. Perhaps the two can combine
their resources for mutual benefit.
Fortunately, many seniors have accumulated relatively
large amounts of cash over the course of their lives.
Unfortunately, they are reluctant to spend or invest this
wealth for fear of losing it. So they put their savings in
Federally insured bank certificates of deposit (CDs) and live
on the interest.
Although this procedure does provide a fixed and safe
income, it does come with two notable drawbacks:
1) Interest rates fluctuate greatly with economic
conditions, and are often quite low.
2) As of this writing, the Federal Deposit Insurance
Corporation (FDIC) protects a maximum deposit of only $100,000
per bank. Which means seniors must put their money in several
different banks, thus incurring a great deal of paperwork and
traveling.
The Government could generate an enormous amount of
income for itself and the senior community by creating a
special CD program exclusively for people age 50 and over.
This Federal CD must meet the following criteria:
1) It should be open only to people age 50 and over.
2) Have a fixed annual interest rate of 8%, with no term
limit and no withdrawal penalty.
3) Be fully insured, regardless of the amount invested.
4) The interest should be deposited directly into the
investor’s bank account on a monthly basis.
5) Income from the CD should be taxed at a rate of only
10%, and taken out automatically.
The nation’s senior citizens would pour hundreds of
millions, if not billions, of dollars into this program. The
Government should, in turn, invest this money in a “total
market index fund.”
Although the stock market does fluctuate (sometimes
greatly), index funds are considerably safer. Over the long-term,
the total market index fund has produced an average
annual return of about 10% since its inception.
Clearly, this plan would create a win-win-win situation.
Seniors would have a generous, dependable and worry-free
income. The Government would make a nice profit (sometimes
VERY nice). And perhaps most importantly, the large and steady
influx of capital into the stock market would greatly reduce
negative fluctuations, serving both to stabilize the economy
and produce jobs.