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Social Security Reform in the United States

33 Pages Posted: 27 Jun 2000  

Andrew A. Samwick

Dartmouth College - Department of Economics; National Bureau of Economic Research (NBER)

Abstract

This paper simulates a transition from the current pay-as-you-go Social Security system to a prefunded system based on Personal Retirement Accounts (PRAs). Annual PRA contributions of 2 percent of taxable payroll earning the historical return on the corporate sector are sufficient to close the financing gap projected for the Old-Age Survivors and Disability Insurance programs and to provide a modest increase in expected retirement income. Critically, the balance in the Social Security Trust Fund is positive and increasing at the end of the usual 75-year forecasting period, showing that the new system is solvent on a permanent basis. The simulations in this paper update the original plan discussed in Feldstein and Samwick (1998). The paper also discusses issues of portfolio risk, income distribution, and administrative costs of a system of PRAs.

Keywords: Social Security, Individual Accounts, Personal Retirement Accounts

JEL Classification: H55 E62 J26

Suggested Citation

Samwick, Andrew A., Social Security Reform in the United States. National Tax Journal, Vol. 52, December 1999. Available at SSRN: https://ssrn.com/abstract=233130 or http://dx.doi.org/10.2139/ssrn.233130

Andrew Samwick (Contact Author)

Dartmouth College - Department of Economics ( email )

Hanover, NH 03755
United States
603-646-2893 (Phone)
603-646-2122 (Fax)

HOME PAGE: http://www.dartmouth.edu/~samwick

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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