A New Social Security: Traditional Social Security Plus a Pension Supplement

Abstract

Almost everywhere, in industrialized and developing nations alike, the same demanding question keeps surfacing: How can we provide for our older population, public or private approaches? Existing public programs in most parts of the world are being scrutinized. There is no denying that the costs of social security programs have been on the rise, and if the trend is allowed to persist, might climb to financially unsustainable levels. In response, dismantling social security has been suggested, and strong advocacy exists for private systems of individual savings and investments. But in reality, like public programs, private systems come with their own potentially troubling downside. Endorsing a mix of public and private approaches, I propose a plan that can combine the best of both: the financial guarantees that only a public social security system can provide, coupled with an opportunity to achieve the higher investment returns offered in the private market.