1. ^aDepartment of Risk Management and Insurance, Georgia State University, P.O. Box 4036, Atlanta, GA 30302-4036, U.S.A. E-mail: insdpr@langate.gsu.edu
2. ^bCarl Vinson Institute of Government, University of Georgia, 201 North Milledge Ave, Athens, GA 30602, U.S.A.

Abstract

The United States debate on Social Security reform is centered on the transition of the public pension system from a pure defined benefit plan to one that would include individual defined contribution accounts. Largely missing from the debate on personal accounts are analyses of potential interactions with other Social Security programmes and the aggregate shift in risk burdens concerning retirement security. This paper provides insights into both issues within the context of personal accounts and the four pillars. We argue that a transition to a personal account system places additional stress on other Social Security programmes and shifts retirement security risk burdens from the national government to individual households. As well, the change would not effectively reduce potential long-run liabilities for the national government since U.S. society is unlikely to tolerate increases in elderly poverty or homelessness. Indeed, potential long-run liabilities may be greater due to the increased investment and longevity risks that would be borne by households.