NBER Working Papers by John Geanakoplos

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Working Papers

July 2009Market Valuation of Accrued Social Security Benefits
with Stephen P. Zeldes: w15170
One measure of the health of the Social Security system is the difference between the market value of the trust fund and the present value of benefits accrued to date. How should present values be computed for this calculation in light of future uncertainties? We think it is important to use market value. Since claims on accrued benefits are not currently traded in financial markets, we cannot directly observe a market value. In this paper, we use a model to estimate what the market price for these claims would be if they were traded.

In valuing such claims, the key issue is properly adjusting for risk. The traditional actuarial approach - the approach currently used by the Social Security Administration in generating its most widely cited numbers - ignores risk and instead s...

Published: Market Valuation of Accrued Social Security Benefits, John Geanokoplos, Stephen P. Zeldes. in Measuring and Managing Federal Financial Risk, Lucas. 2010

May 2008Reforming Social Security with Progressive Personal Accounts
with Stephen P. Zeldes: w13979
The heated debate about how to reform Social Security has come to a standstill because the view of most Democrats (that Social Security must be a defined benefits plan similar in spirit to the current system) seems irreconcilable with the proposals supported by many Republicans (to create a defined contribution system of personal accounts holding marketed assets). We describe a system of "progressive personal accounts" that preserves the core goals of both parties, and that is self-balancing on an ongoing basis. Progressive personal accounts have two critical features: (1) accruals into the personal accounts would be exclusively in a new kind of derivative security (which we call a PAAW for Personal Annuitized Average Wage security) that pays its owner one inflation-corrected dollar du...

Published: Reforming Social Security with Progressive Personal Accounts, John Geanakoplos, Stephen P. Zeldes. in Social Security Policy in a Changing Environment, Brown, Liebman, and Wise. 2009

May 2000Social Security Money's Worth
with Olivia S. Mitchell, Stephen P. Zeldes: w6722
This paper describes how three money's worth measures the benefit-to-tax ratio, the internal rate of return, and the net present value are calculated and used in analyses of social security reforms, including systems with privately managed individual accounts invested in equities. Declining returns from the U.S. social security system prove to be the inevitable result of having instituted an unfunded (pay-as-you-go) retirement system that delivered $7.9 trillion of net transfers (in 1997 present value dollars) to people born before 1917, and will deliver another $1.8 trillion to people born between 1918 and 1937. But young and future workers cannot necessarily do better by investing their payroll taxes in capital markets. If the old system were closed down, massive unfunded liabilit...

Published: Prospects for Social Security Reform, edited by Olivia S. Mitchell, Robert J. Myers, and Howard Young, pp. 79-151, 1999. The Pesion Research Councilof the Wharton School of the University of Pennsylvania.

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