“Government-funded investment accounts for children could be on the horizon,” writes CNBC, “and if tech investor Brad Gerstner has his way, corporate America will match the funds…”
Gerstner been working with lawmakers to promote a legislative program known as Invest America that would create an investing account seeded with $1,000 for each child that’s born in the U.S., but it’s still too early in the process to publicly name supporters. He’s aiming, however, to have legislation passed before the next presidential election. At the same time, he’s working with corporate America to encourage businesses to offer matching funds to help employees further their savings.
“The vision is simple — that corporations would include an Invest America match of $1,000 into the Invest America account of children of their employees,” Gerstner, founder and chief executive of Altimeter Capital, said in an email. “We have talked with companies ranging from Zillow to Dell to Uber and, subject to details, the response has been overwhelmingly positive,” he said. Rich Barton, co-founder and chief executive of Zillow, said it’s a “no-brainer” for his company to fully support and match the type of program Gerstner is proposing. “A 401(k)-style investment account from birth seems like a great way to tackle the growing divide around financial literacy and wealth,” he said in an email. “It is a small investment to help parents achieve more peace of mind.”
Representatives for Microsoft CEO Satya Nadella, Michael Dell and Uber CEO Dara Khosrowshahi, other companies Gerstner cited in a recent CNBC interview as being receptive to his pitch, did not respond to email requests for comment…
Certainly, there can be tangible — and intangible — benefits to companies that participated in a matching program. For instance, the government would have to provide tax incentives to companies that would presumably function similarly to how deductions are handled for 401(k) contributions, said Jeffrey Sharp, executive vice president at HUB International, a global insurance broker that provides employee benefits, and other products and services. Someone with $1,000 in her account at birth could expect a balance of about $107,000 by age 67, provided the portfolio grew at an annualized rate of 7%, according to CNBC Make It’s compounding interest calculator. With a company match, a $2,000 investment could grow to around $215,000, under the same conditions. The outcome could be even more beneficial if parents contribute additional funds.
The article also hedges that companies “would have to consider the advisability of paying for this type of benefit that not all employees could take advantage of. They might decide, for instance, they’d be better off upping their 401(k) match so more employees could benefit.”
But “I think we have a historic moment right now to get everybody into the game of capitalism,” Gerstner says in an interview, noting it would cost just $3.7 billion to fund 50 million accounts — “less than 1/100th of 1% of the national budget” — and that he hopes to see the legislation introduced next year “in the spring.”
