Social Security Reform: Lessons from Private Pensions

25 Pages Posted: 18 Aug 2008

See all articles by Karen C. Burke

Karen C. Burke

University of Florida Levin College of Law

Grayson M.P. McCouch

University of Florida Levin College of Law

Abstract

Widespread concerns about the long-term fiscal gap in Social Security have prompted various proposals for structural reform, with individual accounts as the centerpiece. Carving out individual accounts from the existing system would shift significant risks and responsibilities to individual workers. A parallel development has already occurred in the area of private pensions. Experience with 401(k) plans indicates that many workers will have difficulty making prudent decisions concerning investment and withdrawal of funds. Moreover, in implementing any system of voluntary individual accounts, it will be important to design default settings that provide appropriate guidance for workers with heterogeneous levels of financial sophistication and risk tolerance. The central goal of Social Security reform should be to close the fiscal gap in a way that preserves rather than undermines the existing system of mandatory defined benefits for all workers.

Keywords: pensions, social security, individual accounts, women, administrative, investment risk, default, 401(k), annuity

JEL Classification: K34

Suggested Citation

Burke, Karen C. and McCouch, Grayson M.P., Social Security Reform: Lessons from Private Pensions. Cornell Law Review, Vol. 92, 2007, San Diego Legal Studies Paper No. 08-070, Available at SSRN: https://ssrn.com/abstract=1230861

Karen C. Burke (Contact Author)

University of Florida Levin College of Law ( email )

P.O. Box 117625
Gainesville, FL 32611-7625
United States

Grayson M.P. McCouch

University of Florida Levin College of Law ( email )

P.O. Box 117625
Gainesville, FL 32611-7625
United States

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