“Some men see things as they are, and ask why. I dream of things that never were, and ask why not.”
I’m definitely not normal. As my late grandfather would have no doubt remarked, I was surely “kicked in the head by a butterfly.”
And that’s why I can’t let go of my Junior IRA idea. I know it will never become a reality. It makes too much damn sense! But despite certain failure, my twisted brain compels me to trudge along and tilt at windmills.
Welcome to another installment of tilting.
For those of you who may not be familiar with my Junior IRA (JIRA), here it is in a nutshell.
- A JIRA is nothing but a Roth IRA for minors that is not saddled with a work requirement. In other words, a minor need not have gainful employment to fund his or her JIRA. Contributions can come from other sources.
- The only eligible investment options for JIRAs are low-cost, broad-based stock index funds and ETFs (Vanguard’s VTSMX and VOO, for instance).
- Once a minor turns 18, he or she takes complete ownership of his or her JIRA. But with one catch. A JIRA remains like a Roth in terms of after-tax contributions, but acts like a traditional IRA in terms of distributions as long as the JIRA owner is under 59½. Any money taken out prior to 59½ will be hit with taxes and a penalty. Money taken out after 59½ will be completely unscathed. No taxes or penalties. Just like a normal Roth IRA.
- As noted earlier, contributions to a minor’s JIRA can come from any source—parents, grandparents, aunts, uncles, friends, charities, foundations, churches, schools, businesses, etc.
The Law Is An Ass
I have a burning desire to say, “Screw Congress!” In fact, earlier this year, I wrote a post in which I sheepishly suggested how parents might get around the Roth IRA work requirement by setting up a sham company and providing their children with sham employment. After all, millions of illegal aliens and their enablers flout our immigration laws. Why can’t parents flout our employment and tax laws? Parents wouldn’t be doing it to enrich themselves. They’d be doing it to save their children from a future of dependency. And the only reason they can’t do it above board is because Congress either doesn’t care or doesn’t want a nation of economically strong adults. Aaarrrggghhh!!!
Okay, okay. I’m taking deep breaths now. Inhale slowly. Exhale slowly. Repeat. Repeat again.
I’m a good egg. I have a conscience. And even though this “conscience stuff can drive you nuts,” it’s good to have around. A nation of law-flouters will eventually become a cesspool.
So I intend to play it straight. I don’t want parents conniving to create back-door retirement accounts for their children. I want parents to have a law-given right to set up honest-to-goodness JIRAs for their children. No funny business. And for that to happen, I just have to become a better cheerleader. I have to prove to the vast majority of Americans that my JIRA idea is crucial to the long-term financial health of their children and their country. (Whew! And I thought I was going to have a nice, relaxing retirement.)
Here, then, is more cheerleading on behalf of my beloved JIRA.
Using Education Dollars to Spur Achievement and Help Fund JIRAs
One of the best parts of my JIRA idea is that it allows anyone to contribute to a child’s JIRA. Suppose for a moment that JIRAs exist. And further suppose that our public schools and our Department of Education have decided to devote a miniscule portion of their budgets to JIRA contributions. Just think of the ramifications. What is the current ROI for the taxpayers’ investment in our children. Considering that roughly 60% of high school seniors are neither college nor career ready, the ROI isn’t spectacular.
But what if local schools contributed $50 to a child’s JIRA whenever said child moved up a grade? By the time this child became a senior, he or she would have at least $600 in his or her JIRA. At age 67, in turn, this $600 would turn into $28,140. If local schools contributed $100, high school seniors would have at least $1,200 in their JIRAs. This $1,200 would turn into $56,281 by the time these students hit retirement. Now that’s what I call a good ROI.
Our local schools and Department of Education wouldn’t be limited to making JIRA contributions based solely on grade promotion. They could base it on any number of benchmarks. Here are some ideas that immediately popped into my head.
|Benchmark||JIRA Award||Number of Students Realizing the Benchmark in 2016||Total Cost of JIRA Awards||JIRA Award as Percentage of Average State Per Pupil Spending||JIRA Award as Percentage of New York State Per Pupil Spending||JIRA Award as Percentage of US DOE 2017 Budget|
|Promotion to the next grade||$50||A lot||A lot||0.4%||0.24%||NA|
|Score between 600 and 690 on any part of the SAT||$250||521,929||$130,482,250||NA||NA||0.062%|
|Score 700 or greater on any part of the SAT||$500||195,271||$97,635,500||NA||NA||0.047%|
|Perfect SAT score of 1600||$5,500||Around 600||$3,300,000||NA||NA||0.002%|
|Earn a Microsoft MCSA Certification||$250||NA||NA||NA||NA||NA|
|Earn an ASE Certification||$250||NA||NA||NA||NA||NA|
|Do 20 pull ups, 50 push ups, and run a mile in less than 6 minutes||$250||NA||NA||NA||NA||NA|
Two points. First, the money our education bureaucracy needs to forego in order to make meaningful JIRA contributions is shockingly small. One percent at the local level? Two percent at the federal level? That’s peanuts. Second, my hope is that our education bureaucracy would use its JIRA carrot to spur real academic achievement (i.e, the number of students scoring higher than 700 on any part of the SAT nearly doubles). But what if this isn’t the case? What if our education bureaucracy comes up with a number of benchmarks that just about any student can meet? Would that be terrible? Hell no! That’s even more money into even more JIRAs. And while I loathe the notion of participation trophies, this is one instance where that noxious sentiment would be a blessing.
One of my favorite bloggers is Matt over at Optimize Your Life. He has an exquisite mind and a big heart. In other words, he’s a totally righteous dude. And in one of his recent posts, he highlighted a very alarming trend.
Prior to 1970, workers were rewarded for their increasing productivity. When workers were more productive, they made more money. . . . Since then, worker compensation has been completely divorced from productivity. Workers are being far more productive, but are not seeing any corresponding raise.
The economy is growing. Companies are growing. Profits are growing. But instead of sharing those profits with workers, the benefit of the growth is going entirely to shareholders [emphasis mine].
Now a question. If shareholders are getting far more out of productivity gains and corporate profits than workers—and the evidence that Matt puts forth in defense of this proposition is pretty convincing—shouldn’t we be making our children shareholders as early as possible? And wouldn’t my JIRA combined with achievement-based contributions coming from the education bureaucracy be a perfect way to achieve this?
Okay, groovy freedomists. That’s all I got. What say you? Is my idea of public schools and the Department of Education making achievement-based contributions to every child’s JIRA a worthy contribution to our Second Wednesday of the Month Politics? Does it make my JIRA idea even more appealing? Or should I just give my JIRA idea, and the wonderful environment it creates for truly transformational charity, a rest? Let me know what you think when you get a chance. I’d love to hear your thoughts. Peace.