Article Abstract:
Talks of investing US Social Security funds into the stocks would have to address the concern of how such an inflow of funds will affect the stock market. Historically, projections show that while the Social Security program's share of the stock market may be large, investment is likely to be dispersed. The increased equity returns provided by the stock market as compared to other asset returns makes an investment policy centered on stocks more feasible. The increased attraction to stocks also comes in the light of the draconian nature of payroll tax increases and reductions in retirement benefits.
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Article Abstract:
This study finds good arguments for a Social Security system utilizing individual accounts and requiring annuitization of these accounts at the time of retirement. In comparing the proposed system with the current Social Security systems, the use of several existing types of individual immediate life annuities offers greater freedom in investment and deals with issues of fairness while allowing for bequests. Rough calculations indicate that diversion of 2% of payroll taxes to fund individual accounts could result in a viable system.
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Article Abstract:
Talks on Social Security reform with emphasis on the possible adoption of individual accounts makes the individual annuity market an attractive alternative for investment. However, despite the advantages of providing old age annuities, there are still rationale that compete against the provision of such fiscal tools. Meanwhile, the US government may not be the only institution capable of providing high-return annuities if certain changes encouraging private enterprise are implemented.
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