An individual in a system of personal retirement accounts owns his retirement savings. If he dies prematurely, then he can leave this money to family members. Moreover, the greater benefits generated in a privatized system would be particularly important to the African-American community. Currently, 29.6 percent of all African Americans over age 65 have incomes below the poverty level. The greater monthly payments would have a substantial impact on the lives of these individuals.
Individual accounts are likely to be very costly to administer.
The current system has extremely low administrative costs. By contrast, the administrative costs in the privatized system in Chile have averaged about 15 percent of the money paid in each year. This cost will be borne by all workers, but it is likely to harm lower income workers the most, who disproportionately are women and minorities. Tight government regulation of fees, that requires financial institutions to make accounts available to low income workers at below cost, could reduce this problem, but it is not clear that the financial industry would ever accept this sort of regulation. The second big issue with individual accounts is whether workers will be required to purchase an annuity with their accumulated savings when they reach retirement.