Transition to a Fully Funded Pension System: Five Economic Issues

28 Pages Posted: 11 Jun 2000 Last revised: 21 Mar 2010

See all articles by Martin S. Feldstein

Martin S. Feldstein

National Bureau of Economic Research (NBER) (deceased); Harvard University (deceased)

Date Written: August 1997

Abstract

This paper provides a relatively nontechnical discussion of the effects of shifting from a pay-as-you-go system of Social Security pensions to a fully funded plan based on individual accounts. The analysis discusses the rationale for such a shift and deals with five common problems: (1) the nature of the transition path; (2) the effect of the shift on national saving and capital accumulation; (3) the rate of return that such accounts would earn; (4) the risks of unfunded and funded systems; and (5) the distributional effects of the shift.

Suggested Citation

Feldstein, Martin S., Transition to a Fully Funded Pension System: Five Economic Issues (August 1997). NBER Working Paper No. w6149, Available at SSRN: https://ssrn.com/abstract=225912

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