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Reforming Social Security: Issues and Challenges for Personal Retirement Accounts

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  • Pfau, Wade Donald

Abstract

We seek to analyze a number of important issues related to the ownership of government pensions. In the United States, Social Security is operated on a pay-as-you-go basis, with some limited pre-funding to prepare for the baby boom retirement. Moving toward more of a defined contribution system will require accounting for many details. Social Security will still need to find ways to cover its unfunded liabilities to past and present retirees, as well as to workers who have paid into the system. There are also many issues which will need to be clarified regarding the ownership of personal accounts: will participation be voluntary or mandatory, will annuitization be required, and how freely can participants choose their investment strategy. An assessment of personal accounts must also fully incorporate the role of disability benefits and survivor benefits. Finally, what will happen in the new system if the accounts do not achieve their expected returns? We use the example of the United States to highlight many important issues faced by countries looking to use defined-contribution pensions as a response to aging populations.

Suggested Citation

  • Pfau, Wade Donald, 2007. "Reforming Social Security: Issues and Challenges for Personal Retirement Accounts," MPRA Paper 19034, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:19034
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    File URL: https://mpra.ub.uni-muenchen.de/19034/1/MPRA_paper_19034.pdf
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    References listed on IDEAS

    as
    1. John Geanakoplos & Olivia S. Mitchell & Stephen P. Zeldes, "undated". "Social Security Money's Worth," Pension Research Council Working Papers 98-9, Wharton School Pension Research Council, University of Pennsylvania.
    2. Martin S. Feldstein & Jeffrey B. Liebman, 2002. "The Distributional Effects of an Investment-Based Social Security System," NBER Chapters,in: The Distributional Aspects of Social Security and Social Security Reform, pages 263-326 National Bureau of Economic Research, Inc.
    3. Pfau, Wade Donald, 2006. "Comparing the Impacts of Social Security Benefit Reductions on the Income Distribution of the Elderly," MPRA Paper 19033, University Library of Munich, Germany.
    4. Peter Diamond, 2004. "Social Security," American Economic Review, American Economic Association, vol. 94(1), pages 1-24, March.
    5. John F. Cogan & Olivia S. Mitchell, 2002. "The Role of Economic Policy in Social Security Reform: Perspectives from the President's Commission," NBER Working Papers 9166, National Bureau of Economic Research, Inc.
    6. Gary Burtless, 2000. "Social Security Privatization and Financial Market Risk: Lessons from U.S. Financial History," Discussion Papers of DIW Berlin 211, DIW Berlin, German Institute for Economic Research.
    7. Robert J. Shiller, 2005. "The Life-Cycle Personal Accounts Proposal for Social Security: A Review," NBER Working Papers 11300, National Bureau of Economic Research, Inc.
    8. Alan L. Gustman & Thomas L. Steinmeier, 2002. "The New Social Security Commission Personal Accounts: Where Is the Investment Principal?," NBER Working Papers 9045, National Bureau of Economic Research, Inc.
    9. Ranguelova, Elena & Feldstein, Martin, 2001. "Individual Risk in an Investment-Based Social Security System," Scholarly Articles 2797440, Harvard University Department of Economics.
    10. Martin Feldstein & Elena Ranguelova, 2001. "Individual Risk in an Investment-Based Social Security System," American Economic Review, American Economic Association, vol. 91(4), pages 1116-1125, September.
    11. Pfau, Wade D., 2006. "Comparing the Impacts of Social Security Benefit Reductions on the Income Distribution of the Elderly," National Tax Journal, National Tax Association;National Tax Journal, vol. 59(2), pages 195-210, June.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Social Security Reform; Personal Retirement Accounts; Public Finance;

    JEL classification:

    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions

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