Transition to a Fully Funded Pension System: Five Economic Issues

Martin Feldstein

NBER Working Paper No. 6149
Issued in August 1997
NBER Program(s):   AG   EFG   HC   PE

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.

(698 K)

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Published: Siebert, Horst (ed.) Redesigning Social Security, Institut fur Weltwirtschaft an der Universitat, Kiel. Tubingen: Mohr Siebeck, 1998.

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