Article Published by The Complete Investor, newsletter, August 2011

” Moshe Gerstenhaber holds two doctorates from Middlesex University and is responsible for the creation and management of one of Europe’s largest print, copy and design networks for over two decades. However, he prefers people know him for his work over the last few years–his “new paradigm for the long-term accumulation and build up of pension funds.”

The design of the American Social Security system was based on other ‘Western’ systems: a model where retirement ages were set at greater than life expectancy. Retirement ages now are significantly lower than life expectancies, meaning more money is needed to fund Social Security. That fact, an aging population and a struggling economy virtually ensure the failure of Social Security, both in the U.S. and other ‘Western’ countries.

The problem with Social Security is compounded by the fact that most individuals don’t start saving for retirement until they are well into their 30’s and sometimes 40’s. As life expectancy increases in the West, these problems will become more acute. Dr. Gerstenhaber’s solution is to deal with prospective pension needs by focusing on the individual, on lifelong compounding accumulation of investment value and on plowing these funds into the real economy. Every child born will receive a government grant at birth that would be invested in good companies, infrastructure, rental housing, innovation, etc. Assuming just 5% compounded rate of return, an individual would be assured retirement savings of over $300,000 by the time s/he reaches 70 (5% is considerably less than long-term averages for stocks) with just an initial $10,000 birth grant. Gerstenhaber claims his proposals cost 0.5% of GDP.

This is an appealing plan, but there are caveats: most important is the assumption that equity-type investments will continue to be strong investment vehicles. The risk is they may not be as strong as they have been over the past 65 years. Of course if equities fail to yield at least 5% a year, it’s likely the West will have problems well beyond the funding of pensions.

Moshe states, “I started this because I have a daughter – she’s married with two little girls. What is going to happen to them when they get older?”

Further information on Moshe Gerstenhaber’s ideas for economic reform can be read in his book, Have You Ever Seen A Retired Tiger In the Jungle? available from Kindle, price $5.74 . A focused summary and in-depth interview at http://pensions-crisis.blogspot.com/ ”