Potential Paths of Social Security Reform
AbstractThis paper presents several alternative Social Security reform options in which the projected level of benefits for every future cohort of retirees is as high or higher than the benefits projected in current law. These future benefits can be achieved without any increase in the payroll tax or in other tax rates. Under each option, the Social Security Trust Fund is solvent and ends with a sustainable positive and growing balance. Each option combines the current pay-as-you-go system of defined benefits with an investment-based personal retirement account (PRA). Assets in the PRA can be bequeathed if the individual dies before normal retirement age. We also consider the option in which an individual can take all or part of his accumulated PRA balanced as a lump sum at normal retirement age. The basic plan that we present in greatest detail combines a transfer to the personal retirement account of a portion of the individual's payroll tax equal to 1.5 percent of earnings if the individual agrees to deposit an equal out-of-pocket amount. The additional national saving that results from this option leads to increased business investment and therefore to increased general tax revenue; a portion of that revenue, equal to 1 percent of the PRA balances , is transferred to the Social Security Trust Fund. The other options that we present include plans with no out-of-pocket contributions by individuals and others with no transfer of general revenue to the Trust Fund. We also discuss the implications of different rates of return on the PRA balances and, more generally, the issue of risk, including a market-based method of guaranteeing the real principal of all PRA deposits.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 8592.
Date of creation: Nov 2001
Date of revision:
Publication status: published as Potential Paths of Social Security Reform , Martin Feldstein, Andrew Samwick. in Tax Policy and the Economy, Volume 16 , Poterba. 2002
Note: AG PE
Contact details of provider:
Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
Web page: http://www.nber.org
More information through EDIRC
Other versions of this item:
- H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
This paper has been announced in the following NEP Reports:
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Martin Feldstein, 2005.
"Structural Reform of Social Security,"
Journal of Economic Perspectives,
American Economic Association, vol. 19(2), pages 33-55, Spring.
- Lindbeck, Assar & Persson, Mats, 2002.
"The Gains from Pension Reform,"
Working Paper Series, Research Institute of Industrial Economics
580, Research Institute of Industrial Economics.
- Lindbeck, Assar & Persson, Mats, 2002. "The Gains from Pension Reform," Seminar Papers, Stockholm University, Institute for International Economic Studies 712, Stockholm University, Institute for International Economic Studies.
- AndrÃ¡s Simonovits, 2006. "Social Security Reform in the US: Lessons from Hungary," IEHAS Discussion Papers 0602, Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences, revised 24 Apr 2006.
- Muermann, Alexander & Mitchell, Olivia S. & Volkman, Jacqueline M., 2006. "Regret, portfolio choice, and guarantees in defined contribution schemes," Insurance: Mathematics and Economics, Elsevier, vol. 39(2), pages 219-229, October.
- Andrew Mason & Ronald Lee & An-Chi Tung & Mun-Sim Lai & Tim Miller, 2009.
"Population Aging and Intergenerational Transfers: Introducing Age into National Accounts,"
in: Developments in the Economics of Aging, pages 89-122
National Bureau of Economic Research, Inc.
- Andrew Mason & Ronald Lee & An-Chi Tung & Mun-Sim Lai & Tim Miller, 2006. "Population Aging and Intergenerational Transfers: Introducing Age into National Accounts," NBER Working Papers 12770, National Bureau of Economic Research, Inc.
- Walter Fisher & Christian Keuschnigg, 2010.
"Pension reform and labor market incentives,"
Journal of Population Economics,
Springer, vol. 23(2), pages 769-803, March.
- Walter H. Fisher & Christian Keuschnigg, 2007. "Pension Reform and Labor Market Incentives," CESifo Working Paper Series 2057, CESifo Group Munich.
- Walter H. Fisher & Christian Keuschnigg, 2007. "Pension Reform and Labor Market Incentives," University of St. Gallen Department of Economics working paper series 2007, Department of Economics, University of St. Gallen 2007-13, Department of Economics, University of St. Gallen.
- Fisher, Walter H. & Keuschnigg, Christian, 2007. "Pension Reform and Labor Market Incentives," Economics Series 208, Institute for Advanced Studies.
- Karen E. Smith & C. Eugene Steuerle & Pablo Montagnes, 2004. "Providing Guarantees in Social Security," Working Papers, Center for Retirement Research at Boston College 2004-21, Center for Retirement Research.
- Gary V. Engelhardt & Anil Kumar, 2004.
"Social Security Personal-Account Participation with Government Matching,"
Working Papers, Center for Retirement Research at Boston College
2004-22, Center for Retirement Research.
- Engelhardt, Gary V. & Kumar, Anil, 2005. "Social security personal-account participation with government matching," Journal of Pension Economics and Finance, Cambridge University Press, Cambridge University Press, vol. 4(02), pages 155-179, July.
- Marie-Eve Lachance & Olivia S. Mitchell, 2003.
"Understanding Individual Account Guarantees,"
Working Papers, University of Michigan, Michigan Retirement Research Center
wp035, University of Michigan, Michigan Retirement Research Center.
- Martin S. Feldstein, 2010.
"Preventing a National Debt Explosion,"
NBER Working Papers
16451, National Bureau of Economic Research, Inc.
- Peter A. Diamond & Peter R. Orszag, 2005. "Saving Social Security," Journal of Economic Perspectives, American Economic Association, vol. 19(2), pages 11-32, Spring.
- World Bank, 2005. "Colombia : Public Expenditure Review," World Bank Other Operational Studies 8559, The World Bank.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().
If references are entirely missing, you can add them using this form.