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|a MaCurdy, Thomas E.
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|a Asset Allocation and Risk Allocation
|b Can Social Security Improve Its Future Solvency Problem by Investing in Private Securities?
|c Thomas E. MaCurdy, John B. Shoven
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|a This paper examines the economics of investing the central trust fund of Social Security in private securities. We note that switching from a policy of having the trust fund invest solely in special issue Treasury bonds to one where some of the portfolio holds common stocks amounts to an asset swap. Such an asset swap does not increase national saving, wealth or GDP. We also show that it is far from a sure thing in terms of improving the finances of the Social Security system. The asset swap is deemed successful if the stock portfolio generates sufficient cash to pay off the interest and principal of the bonds and still have money left over. It is deemed a failure otherwise. By using historical data and a bootstrap statistical technique, we estimate that the exchange of ten or twenty year bonds for a stock portfolio would worsen social security's finances roughly twenty to twenty-five percent of the time. Further, failures are autocorrelated meaning that if the strategy fails one year it is extremely likely to fail the next. Such high failure rates imply that the defined benefit structure of benefits becomes less credible with stocks in the trust fund
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MaCurdy, Thomas E. |
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This paper examines the economics of investing the central trust fund of Social Security in private securities. We note that switching from a policy of having the trust fund invest solely in special issue Treasury bonds to one where some of the portfolio holds common stocks amounts to an asset swap. Such an asset swap does not increase national saving, wealth or GDP. We also show that it is far from a sure thing in terms of improving the finances of the Social Security system. The asset swap is deemed successful if the stock portfolio generates sufficient cash to pay off the interest and principal of the bonds and still have money left over. It is deemed a failure otherwise. By using historical data and a bootstrap statistical technique, we estimate that the exchange of ten or twenty year bonds for a stock portfolio would worsen social security's finances roughly twenty to twenty-five percent of the time. Further, failures are autocorrelated meaning that if the strategy fails one year it is extremely likely to fail the next. Such high failure rates imply that the defined benefit structure of benefits becomes less credible with stocks in the trust fund |
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Cambridge, Mass, National Bureau of Economic Research, March 1999 |
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Cambridge, Mass: National Bureau of Economic Research, March 1999 |
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MaCurdy, Thomas E. aut, Asset Allocation and Risk Allocation Can Social Security Improve Its Future Solvency Problem by Investing in Private Securities? Thomas E. MaCurdy, John B. Shoven, Cambridge, Mass National Bureau of Economic Research March 1999, 1 Online-Ressource, Text txt rdacontent, Computermedien c rdamedia, Online-Ressource cr rdacarrier, NBER working paper series no. w7015, Open Access Controlled Vocabulary for Access Rights http://purl.org/coar/access_right/c_abf2 unrestricted online access, This paper examines the economics of investing the central trust fund of Social Security in private securities. We note that switching from a policy of having the trust fund invest solely in special issue Treasury bonds to one where some of the portfolio holds common stocks amounts to an asset swap. Such an asset swap does not increase national saving, wealth or GDP. We also show that it is far from a sure thing in terms of improving the finances of the Social Security system. The asset swap is deemed successful if the stock portfolio generates sufficient cash to pay off the interest and principal of the bonds and still have money left over. It is deemed a failure otherwise. By using historical data and a bootstrap statistical technique, we estimate that the exchange of ten or twenty year bonds for a stock portfolio would worsen social security's finances roughly twenty to twenty-five percent of the time. Further, failures are autocorrelated meaning that if the strategy fails one year it is extremely likely to fail the next. Such high failure rates imply that the defined benefit structure of benefits becomes less credible with stocks in the trust fund, Hardcopy version available to institutional subscribers., Hardcopy version available to institutional subscribers, Mode of access: World Wide Web., System requirements: Adobe [Acrobat] Reader required for PDF files., Shoven, John B. oth, National Bureau of Economic Research oth, http://www.nber.org/papers/w7015 X:NBER Verlag kostenfrei, http://dx.doi.org/10.3386/w7015 X:NBER Verlag kostenfrei, http://dx.doi.org/10.3386/w7015 DE-14, DE-14 2020-03-13T13:49:13Z, http://dx.doi.org/10.3386/w7015 LFER, http://www.nber.org/papers/w7015 LFER, LFER 2020-12-13T20:19:01Z |
| spellingShingle |
MaCurdy, Thomas E., Asset Allocation and Risk Allocation: Can Social Security Improve Its Future Solvency Problem by Investing in Private Securities?, This paper examines the economics of investing the central trust fund of Social Security in private securities. We note that switching from a policy of having the trust fund invest solely in special issue Treasury bonds to one where some of the portfolio holds common stocks amounts to an asset swap. Such an asset swap does not increase national saving, wealth or GDP. We also show that it is far from a sure thing in terms of improving the finances of the Social Security system. The asset swap is deemed successful if the stock portfolio generates sufficient cash to pay off the interest and principal of the bonds and still have money left over. It is deemed a failure otherwise. By using historical data and a bootstrap statistical technique, we estimate that the exchange of ten or twenty year bonds for a stock portfolio would worsen social security's finances roughly twenty to twenty-five percent of the time. Further, failures are autocorrelated meaning that if the strategy fails one year it is extremely likely to fail the next. Such high failure rates imply that the defined benefit structure of benefits becomes less credible with stocks in the trust fund |
| title |
Asset Allocation and Risk Allocation: Can Social Security Improve Its Future Solvency Problem by Investing in Private Securities? |
| title_auth |
Asset Allocation and Risk Allocation Can Social Security Improve Its Future Solvency Problem by Investing in Private Securities? |
| title_full |
Asset Allocation and Risk Allocation Can Social Security Improve Its Future Solvency Problem by Investing in Private Securities? Thomas E. MaCurdy, John B. Shoven |
| title_fullStr |
Asset Allocation and Risk Allocation Can Social Security Improve Its Future Solvency Problem by Investing in Private Securities? Thomas E. MaCurdy, John B. Shoven |
| title_full_unstemmed |
Asset Allocation and Risk Allocation Can Social Security Improve Its Future Solvency Problem by Investing in Private Securities? Thomas E. MaCurdy, John B. Shoven |
| title_short |
Asset Allocation and Risk Allocation |
| title_sort |
asset allocation and risk allocation can social security improve its future solvency problem by investing in private securities |
| title_sub |
Can Social Security Improve Its Future Solvency Problem by Investing in Private Securities? |
| title_unstemmed |
Asset Allocation and Risk Allocation: Can Social Security Improve Its Future Solvency Problem by Investing in Private Securities? |
| url |
http://www.nber.org/papers/w7015, http://dx.doi.org/10.3386/w7015 |
