Prop CBRA
Coalition for Economic and Social Equity proposes the creation of Childbirth Retirement Accounts (CBRA), which are retirement accounts for children, setup by their parents or guardians within 3 years of the birth of a child.
Tax Deductible
The deposits will be tax-deductible for the parents / funders of the plan up to 18 years of age of the child, as an incentive to drive adoption, and will be taxed on withdrawals, similar to IRA accounts.
Key Features
| Description | Retirement account for children that can be setup within 3 years of the birth of a child |
| Account Type | Custodial Account set up by the parent or a guardian |
| Maximum Contribution | One time Tax-deductible contribution up to a maximum $6750, revised annually |
| Minimum Contribution | No Minimum contribution |
| Earnings | Any earnings grow federal income tax-deferred. |
| Withdrawals | 10% early withdrawal penalty may apply for other withdrawals taken prior to age 65. |
| Max Contribution & Gifts | $675 per year tax deferred (10% of the annual maximum) per child. Tax deductible. |
| Self Directed | Access to a wide range of investments offering growth or income including stocks and ETFs. |
Benefit of Compound Interest
The investment vehicle offers the power of compounded interest over a long period of time.
As an example, $6750 invested at birth compounded at 8% annually will yield $1,004,263 over 65 years.
Between 1919 and 2019, the average annual return of the US stock market was about 9.4%.
Bridging the gap between haves and have nots.
CBRA initiative will allow to bridge the widening wealth gap between haves and have nots, even though it may take decades to materialize.
Blacks and other minorities that have faced systemic inequity over multiple generations and have been unable to dig themselves out of poverty, will have a mechanism to create wealth for their children. Now middle white America is facing similar economic impoverishment due to globalization, displacement of decent paying jobs and lack of opportunities. CBRA can eradicate poverty in America.
Reduce the burden on State
Reduce financial burden on the government. Social security is under pressure and will not be able to pay full benefits to seniors by 2034. The Disability Insurance Trust fund will be depleted by 2065
Leave inheritance for your children
As the lower to middle class population faces stagnant wage growth, they are leaving less and less inheritance for their children. You would effectively pass on ~ $1 mn for your children for less than 1% of seed. Let time do its magic.
Live the golden years with dignity
Seniors don’t have enough savings to retire comfortably and will need to continue working, just to survive on minimum wages. A 2017 report from the Government Accountability Office (GAO) found that the median retirement savings for Americans between age 55 and 64 was $107,000 which is grossly inadequate for comfortable retirement