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Author: John Y. Campbell Publisher: University of Chicago Press ISBN: 0226092569 Category : Political Science Languages : en Pages : 509
Book Description
Our current social security system operates on a pay-as-you-go basis; benefits are paid almost entirely out of current revenues. As the ratio of retirees to taxpayers increases, concern about the high costs of providing benefits in a pay-as-you-go system has led economists to explore other options. One involves "prefunding," in which a person's withholdings are invested in financial instruments, such as stocks and bonds, the eventual returns from which would fund his or her retirement. The risks such a system would introduce—such as the volatility in the market prices of investment assets—are the focus of this offering from the NBER. Exploring the issues involved in measuring risk and developing models to reflect the risks of various investment-based systems, economists evaluate the magnitude of the risks that both retirees and taxpayers would assume. The insights that emerge show that the risk is actually moderate relative to the improved return, as well as being balanced by the ability of an investment-based system to adapt to differences in individual preferences and conditions.
Author: John Y. Campbell Publisher: University of Chicago Press ISBN: 0226092569 Category : Political Science Languages : en Pages : 509
Book Description
Our current social security system operates on a pay-as-you-go basis; benefits are paid almost entirely out of current revenues. As the ratio of retirees to taxpayers increases, concern about the high costs of providing benefits in a pay-as-you-go system has led economists to explore other options. One involves "prefunding," in which a person's withholdings are invested in financial instruments, such as stocks and bonds, the eventual returns from which would fund his or her retirement. The risks such a system would introduce—such as the volatility in the market prices of investment assets—are the focus of this offering from the NBER. Exploring the issues involved in measuring risk and developing models to reflect the risks of various investment-based systems, economists evaluate the magnitude of the risks that both retirees and taxpayers would assume. The insights that emerge show that the risk is actually moderate relative to the improved return, as well as being balanced by the ability of an investment-based system to adapt to differences in individual preferences and conditions.
Author: Martin Feldstein Publisher: University of Chicago Press ISBN: 0226241890 Category : Political Science Languages : en Pages : 481
Book Description
Social security is the largest and perhaps the most popular program run by the federal government. Given the projected increase in both individual life expectancy and sheer number of retirees, however, the current system faces an eventual overload. Alternative proposals have emerged, ranging from reductions in future benefits to a rise in taxrevenue to various forms of investment-based personal retirement accounts. As this volume suggests, the distributional consequences of these proposals are substantially different and may disproportionately affect those groups who depend on social security to avoid poverty in old age. Together, these studies persuasively show that appropriately designed investment-based social security reforms can effectively reduce the long-term burden of an aging society on future taxpayers, increase the expected future income of retirees, and mitigate poverty rates among the elderly.
Author: John B. Shoven Publisher: University of Chicago Press ISBN: 0226754812 Category : Political Science Languages : en Pages : 250
Book Description
Social security reform in the United States continues to be a pressing and contentious issue, with advocates touting some form of a centralized or a privatized system of personal accounts. In general, centralized systems offer low administrative costs, but are potentially subject to political mismanagement and appropriation. Privatized account systems, on the other hand, offer higher yields with more flexibility, but may prove too expensive and logistically daunting to implement. Uniting learned and outspoken proponents on both sides of the debate, this volume provides the first comprehensive analysis of the issues involved in administering a system of essentially private social security accounts. The contributors together come to startlingly similar conclusions, generally agreeing that a centralized system of accounts could deliver the benefits of privatization in a feasible and cost-efficient way by accessing administrative mechanisms already in existence. This is perhaps the most far-reaching synthesis yet envisioned of functional and implementable social security reform.
Author: Jeffrey R. Brown Publisher: University of Chicago Press ISBN: 0226076504 Category : Business & Economics Languages : en Pages : 473
Book Description
Social Security Policy in a Changing Environment analyzes the changing economic and demographic environment in which social insurance programs that benefit elderly households will operate. It also explores how these ongoing trends will affect future beneficiaries, under both the current social security program and potential reform options. In this volume, an esteemed group of economists probes the challenge posed to Social Security by an aging population. The researchers examine trends in private sector retirement saving and health care costs, as well as the uncertain nature of future demographic, economic, and social trends—including marriage and divorce rates and female participation in the labor force. Recognizing the ambiguity of the environment in which the Social Security system must operate and evolve, this landmark book explores factors that policymakers must consider in designing policies that are resilient enough to survive in an economically and demographically uncertain society.
Author: Martin S. Feldstein Publisher: ISBN: Category : Social security Languages : en Pages : 122
Book Description
This paper, a forthcoming chapter in the Handbook of Public Economics, reviews the theoretical and empirical issues dealing with Social Security pensions. The first part of the paper discusses pure pay-as-you-go plans. It considers the effects of introducing such a plan on the present value of consumption, the optimal level of benefits in such plans, and the emprical research on the effects of pay-as-you-go pension systems on labor supply and saving. The second part of the paper discusses the transition to investment-based systems, analyzing the effect on the present value of consumption of such a transition and considering such issues as the distributional effects and risk associated with such systems.
Author: Martin S. Feldstein Publisher: ISBN: Category : Pension trusts Languages : en Pages : 24
Book Description
"This paper describes the risks implied by a mixed system of Social Security pension benefits with different combinations of pay-as-you-go taxes and personal retirement account (PRA) saving. The analysis shows how these risks can be reduced by using alternative private market guarantee strategies. The first such strategy uses a blend of equities and TIPS to guarantee at least a positive real rate or return on each year's PRA saving. The second is an explicit zero-cost collar that guarantees an annual rate of return by giving up all returns above a certain level. One variant of these guarantees uses a two stage procedure: a guaranteed return to age 66 and then a separate guarantee on the implicit return in the annuity phase. An alternative strategy provides a combined guarantee on the return during both the accumulation and the annuity phase. Simulations are presented of the probability distributions of retirement incomes relative to the "benchmark" benefits specified in current law. Calculations of expected utility show that these risk reduction techniques can raise expected utility relative to the plans with no guarantees. The ability to do so depends on the individual's risk aversion level. This underlines the idea that different individuals would rationally prefer different investment strategies and risk reduction options"--National Bureau of Economic Research web site.
Author: Peter A. Diamond Publisher: Brookings Institution Press ISBN: 9780815796237 Category : Political Science Languages : en Pages : 300
Book Description
While everyone agrees that Social Security is a vital and necessary government program, there have been widely divergent plans for reforming it. Peter A. Diamond and Peter R. Orszag, two of the nation's foremost economists, propose a reform plan that would rescue the program both from its projected financial problems and from those who would destroy the program in order to save it. vi ng Social Security's's strategy balances benefit and revenue adjustments, following the precedent set by the last major Social Security reform in the early 1980s. The authors' proposal restores long-term balance and sustainable solvency to the program without imposing additional burdens on the rest of the budget. Further, it protects disability and young survivor benefits and strengthens Social Security's protections for low earners and widows. Most important, the plan preserves the program's core social insurance role by providing a base-level of assured income to American workers and their families in time of need. To better understand the accomplishments and financial problems of Social Security, Diamond and Orszag provide background on the program, as well as on the causes of the long-term deficit. They suggest ways in which various alternative reform plans should be evaluated and explain the shortcomings of proposals to replace part of Social Security with individual accounts. Saving Social Security is essential reading for policymakers involved in reform, analysts, students, and all those interested in the fate of this safeguard of American lives.
Author: Michael Tanner Publisher: Cato Institute ISBN: 9781930865556 Category : Political Science Languages : en Pages : 412
Book Description
Tanner (Cato Project on Social Security Choice) brings together work by leaders in Social Security reform, examining problems of the current system and offering proposals for reform. Contributors in economics, law, and philosophy, many affiliated with the Cato Institute, examine aspects of the problem related to issues such as property rights, the impact of Social Security reform on low-income workers, and how stock market declines affect the reform debate. They advocate allowing younger workers to privately invest their Social Security taxes through individual accounts.
Author: Martin S. Feldstein Publisher: ISBN: Category : Retirement income Languages : en Pages : 34
Book Description
This paper shows how a new type of derivative product that could be provided by private financial markets could in principle be used to guarantee that an investment-based Social Security reform provides at least the level of real retirement income that is projected in current Social Security rules. In effect, future retirees could purchase a put option' that guarantees that the future retirement benefit will not fall below the level projected in current Social Security law or some other chosen level. To pay for this guarantee, they would agree to give up the part of the annuity payments which exceeds a given level, effectively selling a call option on the stream of payments. This market-based approach could be completely voluntary, leaving each individual to decide what level of guarantee he wants. The higher the minimum guarantee that the individual chooses, the more of the potentially higher returns he must give up. The financial market can thus tailor each individual's product to his own risk preferences. Alternatively, the government might require that any product that is sold as part of the investment-based Social Security reform must include at least some such market-based guarantee. Our analysis calculates some of the tradeoffs that could be provided in today's financial markets. We show that it is feasible to protect future benefits equal to those projected in current law with a combination of the current payroll tax rate and Personal Retirement Account savings equal to 2.5 percent of covered earnings. Raising the savings rate to 3.0 percent increases substantially the amount of the return that the individual can keep, raising it to 145 percent of the currently projected level of benefits. Reducing the guarantee level to 90 percent of the projected future benefits would increase this upside potential to 150 percent of the currently projected level of benefits with a 2.5 percent saving rate and 195 percent of the currently projected benefits with a 3.0 percent saving rate.
Author: Martin Feldstein Publisher: University of Chicago Press ISBN: 0226241823 Category : Political Science Languages : en Pages : 484
Book Description
This volume represents the most important work to date on one of the pressing policy issues of the moment: the privatization of social security. Although social security is facing enormous fiscal pressure in the face of an aging population, there has been relatively little published on the fundamentals of essential reform through privatization. Privatizing Social Security fills this void by studying the methods and problems involved in shifting from the current system to one based on mandatory saving in individual accounts. "Timely and important. . . . [Privatizing Social Security] presents a forceful case for a radical shift from the existing unfunded, pay-as-you-go single national program to a mandatory funded program with individual savings accounts. . . . An extensive analysis of how a privatized plan would work in the United States is supplemented with the experiences of five other countries that have privatized plans." —Library Journal "[A] high-powered collection of essays by top experts in the field."—Timothy Taylor, Public Interest