A new government-backed investment plan. Some academics, including Alicia Munnell, director of Boston College's Center for Retirement Research, have proposed an altogether different method of risk management — one where the government bears the brunt of the risk. She imagines a new kind of guaranteed account, where the government would guarantee that beneficiaries receive a certain rate of return on their investments.
If the market plunged before they retired, then Uncle Sam would make up the difference. If a relatively modest guaranteed rate of return were chosen, such as 6 percent, then she says the government would rarely have to step in, so the cost would be minimal. Another option is to guarantee just a 2 or 3 percent return but to allow investors to keep any higher return provided by the market. If the government found itself needing to pony up during bad periods like the current one, then, Munnell says, "it can take on more debt and spread the losses over several generations," instead of forcing the soon-to-be retirees to absorb most of the pain.
Now, this makes sense. Uncle Same guarantees all sorts of things, why not old age pensions. There has NEVER been a 15-year period in which the market has lost money. And 90+ percent of the 5-year periods have seen positive returns. Nearly ANY investment vehicle would have a higher return than Social Security. This plan could have the additional advantage of heritability.
In those years when the government had to make up a shortfall, the system could recapture lost dollars from the estate (if the money could be left to an estate, unlike the current boondoggle).
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