This paper examines the risk aspects of an investment-based defined contribution Social Security plan. We focus on the … risk after the plan is fully phased in. Individuals deposit a fraction of wages to a Personal Retirement Account (PRA … cushion' that protects the individual from the risk of an unacceptably low level of benefits. For example, PRA deposits of 6 …

current law. Calculations of expected utility show that these risk reduction techniques can raise expected utility relative to … the plans with no guarantees. The ability to do so depends on the individual's risk aversion level. This underlines the … idea that different individuals would rationally prefer different investment strategies and risk reduction options …