The Presidents Social Security Plan: How much would you pay to participate?

Abstract

President Bush is in favor of using private retirement accounts to partially replace the current pay-as-you-go social security program. We use a simple life-cycle model to analyze whether or not private accounts would benefit workers. "Cash equivalents" are calculated under different assumptions to see how much a worker would be willing to pay to participate in the private account program. In most circumstances, workers would benefit from the private account program. Only when market rates of return are very low or a person expects to live for a very long time does the current pay-as-you-go system give a greater present value to a worker.