Social Security Privatization: Balancing Efficiency and Fairness

Growing public awareness of future pressures on Social Security is eroding many Americans’ confidence in this key retirement program. These pressures are nearly certain in the next century, stemming from the retirement of the large baby-boom generation, longer average life spans, and lower projected fertility rates. To meet such pressures, various reforms of Social Security have been proposed, ranging from simple repairs to the current system all the way to full privatization. In this context, privatization usually means moving the public retirement system toward a set of individual accounts with the workers’ funds invested partly in private securities and with workers having some measure of control over investment allocations.