To study the effects of privatization, the firm built a computer simulation to compare investment results for different asset class portfolios with projected Social Security benefits for workers at different income levels and different marital conditions. Using rate of return probabilities, they found that while some workers would receive higher benefits under a privatization plan, a significant number would receive lower benefits. Some sample figures, shown as percent of Social Security benefits, are shown below. More important, both groups can have the results reduced if their long term returns are reduced by only one percent. This is significant since the average domestic equity fund has trailed the Standard and Poor's 500 index by 4.11 percent a year over the last 15 years.
Rich people can, and do, live well with uncertainty.
But Social Security was not created to benefit rich people. It was created to provide a socially acceptable floor on income for everyone who worked. Who knows, it might even promote marriage. Questions of general interest will be answered in future columns.