He was familiar, however, with the main features of the private system and the fact that the Chilean model has been imitated in several other Latin American countries. A recent college graduate also liked the system but complained about not being able to invest more abroad or in a riskier portfolio. The minimum return guarantee in the Chilean system encourages portfolio managers to invest all workers' savings in pretty much the same way. But the risk and return preferences of all workers are not the same. And the risk and return preferences of an individual worker are unlikely to be the same at all times of his professional career.
Younger workers are more likely to prefer riskier portfolios than workers close to retirement.
Greater flexibility in the investment rules would allow workers to make prudent changes in the risk profiles of their portfolios as they got older. The issues I discussed with many Chileans were not simple. Yet they knew what they were doing within a set of financial incentives and structural constraints. If trusting people and expanding opportunities for all Americans are important to President Bush, he should move ahead with his plans to allow all American workers to invest part of their payroll taxes in financial markets. If given that choice, American workers, like their Chilean counterparts, will know what is best for them.