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Reforming Social Security: A Practical and Workable System of Personal Retirement Accounts

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  • Fred T. Goldberg, Jr.
  • Michael J. Graetz
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    Abstract

    This paper details a method for implementing personal retirement accounts (PRAs) as a part of Social Security reform. The approach described here answers the following questions: how funds are collected and credited to each participants' retirement account; how money is invested; and how funds are distributed to retirees. It is designed to accommodate a variety of answers to a wide range of important policy questions; to minimize administrative costs and distribute those costs in a fair and reasonable way; to minimize the burden on employers, especially small employees who do not now maintain a qualified retirement plan; and to meet the expectations of Americans for simplicity, security, control, and independence in ways that are easy to explain and to understand. The system we describe relies on existing payroll and income tax mechanisms for collecting PRA funds and crediting PRA accounts. It provides two basic options for investments: (i) a simply system involving a limited number of funds sponsored by the Social Security Administration and managed by private companies, and (ii) privately sponsored funds with additional investment choices. It also provides two distribution alternatives if distributions are required to be annuitized: (i) an increase in Social Security benefits, and (ii) inflation-protected annuities provided directly to retirees by private companies.

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    Bibliographic Info

    Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 6970.

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    Date of creation: Feb 1999
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    Publication status: published as Fred T. Goldberg, Jr. & Michael Graetz, 2000. "Reforming Social Security --A Practical and Workable System of Personal Retirement Accounts," NBER Chapters, in: Administrative Aspects of Investment-Based Social Security Reform, pages 9-40 National Bureau of Economic Research, Inc.
    Handle: RePEc:nbr:nberwo:6970

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    Cited by:
    1. Martin Feldstein & Andrew Samwick, 1999. "Maintaining Social Security Benefits and Tax Rates through Personal Retirement Accounts: An Update Based on the 1998 Social Security Trustees Report," NBER Working Papers 6540, National Bureau of Economic Research, Inc.
    2. Martin Feldstein & Jeffrey Liebman, 2000. "The Distributional Effects of an Investment-Based Social Security System," NBER Working Papers 7492, National Bureau of Economic Research, Inc.

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