PPT Slide
Source: David C. John and Gareth G. Davis, "The Cost of Managing Individual Social Security Accounts," Heritage Foundation Backgrounder No. 1238, December 3, 1998.
Individual Accounts and Defined Contributions
- Cost of managing these accounts
- Growing need for investment education
- Risk is present in either situation, but in Social Security the risk is broadly shared, while in individual accounts the risk is borne by the individual
- Philosophy between defined benefits and defined contributions
- Partial privatization would shift Social Security toward becoming a defined-contribution plan, in which benefits are dependent upon how contributions are invested.
- Private pension plans are increasingly of the defined-contribution type, such as 401(k) plans.