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How Would Financial Risk Affect Retirement Income Under Individual Accounts?

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  • Gary Burtless

Abstract

A popular proposal for reforming Social Security is to supplement or replace traditional publicly financed benefits with a new system of mandatory, defined contribution private pensions. Proponents claim that private plans offer better returns than traditional Social Security. To achieve higher returns, however, contributors are exposed to extra risks associated with financial market fluctuations. This issue in brief offers evidence on the extent of these risks by considering the hypothetical pensions U.S. workers would have obtained during the past century if they had accumulated retirement savings in individual accounts.

Suggested Citation

  • Gary Burtless, 2000. "How Would Financial Risk Affect Retirement Income Under Individual Accounts?," Issues in Brief ib-5, Center for Retirement Research.
    • Handle: RePEc:crr:issbrf:ib-5
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    References listed on IDEAS

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    1. John Geanakoplos & Olivia S. Mitchell & Stephen P. Zeldes, "undated". "Would a Privatized Social Security System Really Pay a Higher Rate of Return?," Pension Research Council Working Papers 98-6, Wharton School Pension Research Council, University of Pennsylvania.
    2. 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.
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    Cited by:

    1. Alicia H. Munnell & Alex Golub-Sass & Richard W. Kopcke & Anthony Webb, 2009. "What Does It Cost To Guarantee Returns?," Issues in Brief ib2009-9-4, Center for Retirement Research, revised Feb 2009.
    2. Alicia H. Munnell & Anthony Webb & Alex Golub-Sass, 2008. "How Much Risk is Acceptable?," Issues in Brief ib2008-8-20, Center for Retirement Research, revised Nov 2008.
    3. Purvi Sevak, 2002. "Wealth Shocks and Retirement Timing: Evidence from the Nineties," Working Papers wp027, University of Michigan, Michigan Retirement Research Center.
    4. Thomas L. Hungerford, 2003. "U.S. Workers' Investment Decisions for Participant-Directed Defined Contribution Pension Assets," Economics Working Paper Archive wp_375, Levy Economics Institute.

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