TY  - JOUR
AU  - Feldstein,Martin
AU  - Samwick,Andrew
TI  - The Transition Path in Privatizing Social Security
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 5761
PY  - 1996
Y2  - September 1996
UR  - http://www.nber.org/papers/w5761
L1  - http://www.nber.org/papers/w5761.pdf
N1  - Author contact info:
Martin S. Feldstein
President Emeritus
NBER
1050 Massachusetts Avenue
Cambridge, MA  02138-5398
Tel: 617/868-3905
Fax: 617/868-7194
E-Mail: msfeldst@nber.org

Andrew Samwick
6106 Rockefeller Hall
Department of Economics
Dartmouth College
Hanover, NH 03755-3514
Tel: 603/646-2893
Fax: 603/646-2122
E-Mail: andrew.samwick@dartmouth.edu
M1  - published as Martin Feldstein, Andrew Samwick. "The Transition Path in Privatizing Social Security," in Martin Feldstein, editor, "Privatizing Social Security" University of Chicago Press (1998)

M2  - featured in NBER digest on 1997-04-01
AB  - This paper analyzes the transition from the existing pay-as-you-go Social Security program to a system of funded Mandatory" Individual Retirement Accounts (MIRAs).  Because of the high return on real capital relative to the very low return in a mature pay-as-you-go program, the benefits that can be financed with the existing 12.4 percent payroll tax could eventually be funded with mandatory contributions of only 2.1 percent of payroll.  A transition to that fully funded program could be done with a surcharge of less than 1.5 percent of payroll during the early part of the transition.  After 25 years, the combination of financing the pay-as-you-go benefits and accumulating the funded accounts would require less than the current 12.4 percent of payroll.  The paper also discusses how a MIRA system could deal with the benefits of low income employees and with the risks associated with uncertain longevity and fluctuating market returns.
ER  -