Paying For Your Baby's Retirement


Hi folks

I've been reading and thinking lots about how governments will afford to pay pensions in the future. We are living longer and pension monetary pools are shrinking.  It's a problem .... and if it's not a problem for us personally then it certainly will be a problem for the small children in our families in the future.

The solution to this problem that I like the best is already widely discussed on the interwebs - it goes something like this: 

The Solution (Government Administered)

Very simply, if $20K were placed into a tax-free Index market fund by the Government, nothing added to it and just allowed to compound at average index market return rates, then at age 60 today's child could retire on a pension income of $88,000 annually, based on today's money. 

If the child passed away at anytime before retirement then the funds would simply be reapportioned by the Government to the next birth within the country. Similarly, as the pensioner passed away of old age the remaining funds would be reapportioned to the next birth within the country.

It is a simple concept, a generous concept and one that would cost significantly less money to a government budget than the current plethora of pensions and associated rebates and refunds administered by the Government. 

(I'm not sure who cooked this idea up first - if you know, then please let me know so I can reference this properly)

So, if we wait around for Governments to implement this it would take another 500 years for them to get their act together I reckon, so why not implement  this solution  personally within our own families? It's 100% possible.  The method is a bit different but the concept is the same and it could be easily administered inside a family without any Government meddling. 

Here's how .....

The Solution (Self Administered)

Each time a child is born into a family the following occurs

1. $1000 is immediately placed in a tax-free Index market fund set up in the child's name under trust (Yes, they exist and are very common and simple to set up)

2. $115 per month (or 26.53 weekly) is added to this fund right through till the child starts their first job

3. Once the child starts working, then they take over the $115 monthly payment into the fund themselves.

4. By age 60 the 'child' can then retire on $89K per annum (in today's money) 

5. Once the 'child' passes away of old age then there will enough still in the fund to pay for a generous funeral and bequeath over $1 million via their estate as they see fit.

This is very simple math based on compounding over 60 years using very small regular amounts of money. The result is nothing short of astounding.

Never underestimate the power of $115 every month! ($26.53 a week)

It's worth thinking about I reckon.

Take care and stay nice



  1. Gosh, that does sound so simple doesn’t it. I have had to wait an extra 6 years to get the pension I am shortly due, now aged 66 rather than 60. On top of that, I have also had to pay another 5 years contributions. Those goalposts were changed with little warning. Certainly the above idea would have been better and able to be implemented wouldn’t it.

    1. I've heard that about UK pensions - that's pretty tough Dc. I bet you're well and truly ready to enjoy retirement now.

  2. Compound interest is amazing....if only we could go back to when I was does sound so simple doesn't it. Great post and thought provoking.

    1. I guess the amazing thing about these set of calculations is that it teaches me that the the earlier we start , the less we need to contribute. Compounding truly is the 8th wonder of the world.


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