Proposals to bolster the Social Security trust fund by allowing it to invest in private equities have stirred controversy for more than a decade, but the experience of a retirement plan for railroad workers offers a glimpse at the pitfalls and how they could be avoided, a Center for Retirement Research brief found.
The political and financial risks associated with such investments have long been enough to keep the Social Security fund from getting the nod to invest in equities. The Railroad Retirement program, which is similar to Social Security's pay-as-you-go model, started investing in equities in 2001.
Social Security would need to do two things to follow the path of the Railroad Fund, the center, based at Boston College, said. First, to keep political influence out of the management process, it recommended a "highly circumscribed investment program using index funds." Second, an automatic mechanism to absorb market risks would need to be put in place.
Complete your profile to continue reading and get FREE access to BenefitsPRO, part of your ALM digital membership.
Your access to unlimited BenefitsPRO content isn’t changing.
Once you are an ALM digital member, you’ll receive:
- Critical BenefitsPRO information including cutting edge post-reform success strategies, access to educational webcasts and videos, resources from industry leaders, and informative Newsletters.
- Exclusive discounts on ALM, BenefitsPRO magazine and BenefitsPRO.com events
- Access to other award-winning ALM websites including ThinkAdvisor.com and Law.com
Already have an account? Sign In
© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
