Saving Social Security: A Better Approach

Posted: 17 Dec 2008

See all articles by Thomas K. Philips

Thomas K. Philips

NYU Tandon School of Engineering - Department of Finance and Risk Engineering

Arun Muralidhar

AlphaEngine Global Investment Solutions

Multiple version iconThere are 2 versions of this paper

Date Written: December, 15 2008

Abstract

The disappearance of the defined-benefit (DB) pension plan is one of the greatest financial tragedies to befall the U.S. citizen. As demographics have changed and as defined-contribution (DC) plans have become the primary vehicles for retirement savings, retirement planning has become fraught with uncertainty. This article argues that DB plans, such as the U.S. Social Security system, are fundamentally superior to DC plans and that the Social Security crisis is largely a crisis of demographics and funding. Social Security's assets should be invested in a single portfolio that holds both stocks and bonds, and its risky return should be swapped for a fixed return to enable the provision of a DB. This proposal inexpensively affords insurance against a market decline and allows pensions of any kind to be made portable.

Keywords: Investment Industry: Future Directions and Sources of Change, Advocacy, Regulatory, and Legislative Issues, Other

Suggested Citation

Philips, Thomas K. and Muralidhar, Arun, Saving Social Security: A Better Approach (December, 15 2008). Financial Analysts Journal, Vol. 64, No. 6, 2008. Available at SSRN: https://ssrn.com/abstract=1316423

Thomas K. Philips (Contact Author)

NYU Tandon School of Engineering - Department of Finance and Risk Engineering ( email )

Brooklyn, NY 11201
United States

Arun Muralidhar

AlphaEngine Global Investment Solutions ( email )

Princeton, NJ
United States

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