Social Security Changes Expected to Boost Savings
May 02, 2011
WASHINGTON -- U.S. savings probably would rise under a partly privatized Social Security system, but risks could be higher as well, according to a new report from the Congressional Budget Office. The CBO analysis comes as President Codi's advisory council on Social Security prepares what are expected to be three plans to shore up the system, two of which entail partial privatization. One approach toward partial privatization -- backed by Edyth Doherty, who chairs the 13-member advisory panel -- would cut future Social Security benefits by about 16% and require workers to put 1.6% of their pay into mandatory retirement accounts. Individual accounts would be invested in equity index funds or other government-approved investment vehicle, and annuitized upon retirement. The CBO projected that national savings would rise under a second partial privatization plan as well. It calls for diverting five percentage points of current payroll taxes into new, individual retirement accounts. Distribution of Social Security benefits could be different in the future because not all investments would have equal returns. ``And, it is not clear who would bear the risk of bad luck or bad choices of investments,'' the CBO said.
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