Would a Privatized Social Security System Really Pay a Higher Rate of Return?.

As the U.S. Social Security system has matured, the rate of return received by participants has fallen. In the coming years, around the time the Baby Boom generation retires, the system will experience a budget shortfall. Many advocates of reform suggest that an answer to this problem is to rivatize Social Security. Our goal in this paper is to challenge the following popular argument: a)projected returns to Social Security are low relative to expected returns on stocks and bonds, and therefore b) everyone would receive higher returns and be better off if we moved to a privatized system where individuals could directly invest their contributions in sotcks and bonds.