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Social Security as a Financial Asset: Gender-Specific Risks and Returns


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  • Marianne Baxter


Social Security is a financial asset whose 'purchase' is compulsory for most working individuals; the return during the individual's working lifetime is related to the rate of change of aggregate labor income. If an individual's labor income is strongly related to aggregate labor income, then the Social Security asset is a particularly unattractive asset. In this situation, the individual would benefit from a reformed Social Security system that would permit investment of retirement funds in other financial assets. This paper investigates how this aspect of Social Security risk varies across groups of individuals who differ according to gender; education; race; and age. The main finding is that there are important differences across groups in this component of Social Security risk, as captured by the sensitivity of individual-level income growth to changes in the SSWI. This element of risk is most important for women, especially women who are young-to-middle aged and with more education. This analysis suggests that women would have more to gain, compared with men, from a reformed Social Security system.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 8329.

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Date of creation: Jun 2001
Date of revision:
Publication status: published as Baxter, Marianne. "Social Security as a Financial Asset: Gender-Specific Risks and Returns." Journal of Pension Economics and Finance 1, 1 (March 2002): 35-52.
Handle: RePEc:nbr:nberwo:8329

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  1. Alan L. Gustman & Olivia S. Mitchell & Andrew A. Samwick & Thomas L. Steinmeier, 1997. "Pension and Social Security Wealth in the Health and Retirement Study," NBER Working Papers 5912, National Bureau of Economic Research, Inc.
  2. Arthur B. Kennickell & Martha Starr-McCluer & Annika E. Sunden, 1997. "Family finances in the U.S.: recent evidence from the Survey of Consumer Finances," Federal Reserve Bulletin, Board of Governors of the Federal Reserve System (U.S.), Board of Governors of the Federal Reserve System (U.S.), issue Jan, pages 1-24.
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Cited by:
  1. David McCarthy, 2003. "A Lifecycle Analysis of Defined Benefit Pension Plans," Working Papers, University of Michigan, Michigan Retirement Research Center wp053, University of Michigan, Michigan Retirement Research Center.
  2. Alexander W. Blocker & Laurence J. Kotlikoff & Stephen A. Ross, 2008. "The True Cost of Social Security," NBER Working Papers 14427, National Bureau of Economic Research, Inc.


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