How Do Individual Social Security Accounts Stack Up? An Evaluation Using the EBRI-SSASIM2 Policy Simulation Model

This paper shows cost, benefit, national saving, and growth projections under five options for reforming the Old-Age and Survivors Insurance (OASI) program. Of these, two are partially privatized (quot;two-tieredquot;) options with individual account contributions equal to 5 percent of taxable payroll. One option is modeled under the assumption that, on average, participants invest individual Social Security account balances in a quot;life-cyclequot; mix of equities and Treasury bonds, while the other option is modeled assuming 100 percent Treasury bond investment. In addition to the two-tiered options, the paper presents projections for three traditional reforms that would bring the current system into financial balance: the first would exclusively raise taxes; the second would raise taxes as well as the normal retirement age (NRA); and the third would reduce benefits only.As the Social Security debate heats up, the unprecedented quantitative analysis available through the EBRI-SSASIM2 Policy Simulation Model will provide policymakers and the public with information necessary for making informed policy decisions. In fact, this type of model was specifically suggested for use in the recommendations regarding research and data in the Report of the 1994-96 Social Security Advisory Council (Social Security Advisory Council, 1997)