SSA Study Outlines Potential Problems for Gore Personal Accounts Plan

August 31, 2000

A new study published in the Social Security Bulletin casts doubts on the effectiveness of the voluntary system of supplemental retirement accounts proposed by Vice President Gore. Authors Glenn R. Springfield and Theresa M. Wilson, both with the Social Security Administration's Office of Retirement Policy, study participation rates in IRA's, 401(k)s and the federal Thrift Savings Plan (TSP). Springfield and Wilson find that participation in these retirement savings accounts increases according to age, incomes, education and full-time working status. Moreover, men participate at higher rates than women and whites at higher rates than blacks, even when controlling for income.

The upshot for the Gore plan, which demands that workers make contributions to the accounts in addition to the payroll taxes they already pay to Social Security, is that the workers most in need of extra savings are those least likely to take part. For instance, just one-third of workers earning under $15,000 - the workers the Gore plan targets - are currently invested in 401(k) plans.

By contrast, personal retirement accounts funded with payroll taxes invest a portion of the taxes that workers already pay. Hence, all workers would be able to participate. For more information, see "Social Security Reform Proposals: USAs, Clawbacks, and Other Add-Ons" by Darcy Ann Olsen.

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