NCPA - National Center for Policy Analysis

Kidsave: Supplemental Accounts For Social Security

December 20, 2000

Social Security was intended to be supplemented with personal savings and by itself provides a meager income for retirees. KidSave, a proposal by Sen. Robert Kerrey (D-Neb.), would establish retirement accounts for future generations that would supplement their Social Security benefits.

  • Under KidSave, every American child would receive a $2,000 loan at birth from Social Security that would be deposited in a KidSave account.
  • The funds would be invested through the Thrift Savings Plan, the retirement savings plan currently used by federal employees.
  • The funds in a KidSave account could be withdrawn only at retirement - or upon the death of the owner - and used to increase retirement income, send a grandchild to college or make a donation to a church or community organization.

The initial $2,000 deposit could grow to as much as $250,000 by the time the child retired. If parents wanted to increase the value of their child's account, they could deposit up to $500 annually in their child's account until he or she reaches age 19.

When the account owner reaches age 30, the initial $2,000 loan would have to be repaid out of the balance of their account in five annual installments. Thus, young Americans essentially have a retirement account financed with funds loaned to them from their own future Social Security benefits.

The proposal has bipartisan support in Congress and is cosponsored by Sens. Rick Santorum (R-Penn.), Daniel Patrick Moynihan (D-N.Y.), Charles Grassley (R-Ia.) and John Breaux (D-La.).

Source: David C. John, "KidSave: An Innovative Step Toward Better Retirement Security," Executive Memorandum No. 704, October 27, 2000, Heritage Foundation, 214 Massachusetts Avenue N.E., Washington, D.C. 20002, (202) 546-4400.


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