Wednesday, February 23, 2005

Private Accounts -- Tried And Failed

Private Accounts--Tried And Failed
by Political Animal, Washington Monthly 
Private accounts failed to catch on in several states because people like guaranteed benefits better. Of course, if you cut those enough, Bush's plan might start to look better...and he knows it.

PRIVATE ACCOUNTS AROUND THE COUNTRY....The excellent Peter Gosselin has an interesting piece in the LA Times today about states and counties that have experimented with private accounts over the past couple of decades.

When Nebraska's state and county workers were given do-it-yourself accounts, they made so many investment errors that they ended up making less than colleagues with fixed-benefit pensions --- and less than what analysts have said is needed for old age.

Their poor performance led the Nebraska Legislature two years ago to junk the accounts for new employees.

While Americans are just beginning to grapple with the president's proposal for private accounts, employees and retirement officials in Michigan, Montana, Washington, West Virginia and other states have discovered that the accounts can fall far short of their promise.

West Virginia board officials are debating whether to drop the state's private account plan as Nebraska did.

Generally speaking, people prefer guaranteed benefits and don't trust their ability to manage their own retirement investments.

Of course, if you slash guaranteed benefits enough, that would probably motivate people to sign up --- and as near as I can tell, that's Bush's plan.

It's not his public plan, but it appears to be his plan nonetheless.

Summarized by Copernic Summarizer


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