Risky Business? Evaluating market risk of equity investment proposals to reform social security
By: WELLER, Christian
.
Material type: 
ArticlePublisher: 2000Journal of Policy Analysis and Management 19, 2, p. 263-273Abstract: A number of options have been proposed to address the expected financing shortfall of Social Security in the nest century. Most basic aspects of the various reform proposals are captured by the three options offered by the Advisory Council on Social Security in 1996. Common to all three options is that they would permit either public or private equity investment. This article discusses the economic risks involved in public and private equity investments as a funding solution for Social Security. To quantify the risks involved in equity investment, stochastic simulations are based on the economic assumptions of the 1998 Trustees Report of Old Age and Survivors Insurance and Disability Insurance in combination with different assumptions abou the rates of return on bonds and stocks. For public equity investiment, financial market risk remains significant for at least 40 years. For individual accounts, I find that the change of doing worse than with Social Security or of falling into poverty in retirement is generally high, yet vaires with income level, gender, family status, and employment history. In general, women, married workers with dependent spouses,or workers with incomplete work histories fare worse than men, single workers, or workers with complete work histories when compared either to the current system or to the poverty line
| Item type | Current location | Collection | Call number | Status | Date due | Barcode |
|---|---|---|---|---|---|---|
| Periódico | Biblioteca Graciliano Ramos | Periódico | Not for loan |
A number of options have been proposed to address the expected financing shortfall of Social Security in the nest century. Most basic aspects of the various reform proposals are captured by the three options offered by the Advisory Council on Social Security in 1996. Common to all three options is that they would permit either public or private equity investment. This article discusses the economic risks involved in public and private equity investments as a funding solution for Social Security. To quantify the risks involved in equity investment, stochastic simulations are based on the economic assumptions of the 1998 Trustees Report of Old Age and Survivors Insurance and Disability Insurance in combination with different assumptions abou the rates of return on bonds and stocks. For public equity investiment, financial market risk remains significant for at least 40 years. For individual accounts, I find that the change of doing worse than with Social Security or of falling into poverty in retirement is generally high, yet vaires with income level, gender, family status, and employment history. In general, women, married workers with dependent spouses,or workers with incomplete work histories fare worse than men, single workers, or workers with complete work histories when compared either to the current system or to the poverty line
Click on an image to view it in the image viewer
There are no comments for this item.