Investing Social Security trust funds in the stock market and creating Individual Retirement Accounts are among the options discussed and voted upon at these forums.

17.2 When, and how, should the Social Security trust funds enter the stock-bond markets?

This can be done in various ways, but most proposals to do so envisage it being done by having an independent board investing on an index basis.

17.3 How much would Treasury Bill interest rates increase if the Social Security trust funds were privately invested and were not available to the government for its use (supply and demand would dictate that the interest rates would increase because the government would have to borrow the money that is now unavailable to it)?

There is not a way to predict interest rates; the more the treasury has to borrow, the higher the interest rate will be.

17.4 Is the available income of the Social Security program treated like an investment? Or is it a dollar in and a dollar out?

Social Security contributions and interest income on invested assets not needed to pay benefits are invested by the trust funds in government securities backed by the full faith and credit of the U.S. Government. These securities pay a fair, long-term rate of interest, and they are recognized as part of the national debt.

17.5 If Wall Street had not been so "bullish" in the last 9-10 years, would we even be having this discussion today?

The success of the stock market over the last ten years has no doubt had considerable impact on the debate of today.

17.6 How would privatization schemes avoid undue government influence of private markets?

This question assumes that the form of "privatization" would have the government invest a portion of Social Security reserves in the private market. The government currently performs a similar role for the retirement plan for federal employees. There is a board that oversees all investment decisions, and the law limits the investments to broad indexes where the investments are spread out over a variety of private enterprises. This type of arrangement could also be set up for Social Security.

17.7 How would privatization schemes avoid the potential for scams?

This is an area that needs thorough exploration before responsibility for retirement investments is placed more heavily on individuals. Government regulation will be required. As has been the experience in regulating "Medigap" health insurance policies, it is not necessarily easy to anticipate and prevent all the schemes that can be developed to make money off the unsuspecting.

17.8 If Social Security were eliminated, and people took that money and invested in IRAs, etc., what would be the impact on elderly poverty levels compared with the estimate of how many elderly would be on poverty if Social Security was eliminated without saving and investing that money?

Social Security has reduced the poverty rate for older Americans from 35% to 11% over the last 40 years. Every year, Social Security is the most important source of income to the elderly. It is the strongest and most universal "leg" of the so-called "retirement stool". About two-thirds of the aged receive more than half their income from Social Security. A privatized system places the burden on individuals for the management and outcomes of their investment upon which they will derive their retirement income.

17.9 Would privatization mean an increase in benefits or would it just keep the program solvent?

Privatization would likely produce different outcomes for different people depending upon their success in their investments and the economic conditions of the market at the time they retire. Often overlooked are the transition costs associated with paying for a new privatized system while still providing some benefits for those under the existing Social Security system. The transition costs can be paid for either by tax increases or by benefit cuts or both. All privatization proposals include significant tax increases, benefit cuts or a combination of the two.

17.10 If I had invested all the money that my employer and I paid into Social Security fund in 35 years of working into an annuity every year at the prevailing interest for that year, assuming maximum contribution, how would my annual payout be compared with what I am getting from Social Security starting at 65?

As compared with the present $1,343 per month at age 65, the amount under a privatized system would probably have been higher, depending upon past investment experience. However, keep in mind that the employer contribution is not specifically assigned to the worker individually, but rather may be said to be used to provide the relatively larger benefits for lower paid persons.

17.11 Would some privatization take place and who would make that decision?

Since privatization requires legislative change to existing Social Security law, the Congress and the President will be the final decision makers.

17.12 Won't privatization risk the floor of economic protection for all people that most of the groups here seem to value? It is very important to me that everyone is protected, and I fear that privatization (even partial) will not do so.

This has no factual answer. Those in favor of privatization would answer differently than those against privatization.

17.13 If 25% of contributions were put in the stock market, how much money would that be?

Contributions total approximately $400 billion. If 25% of those contributions were put into the stock market, it would be approximately $100 billion invested.

17.14 Why don't we invest the assets of the Social Security program in the stock market, or else allow individuals to invest some of their Social Security contributions?

There are many reform options being examined currently. This is a suggestion that should be brought to your Congressional Representative or Senators.

17.15 If other governments have done well on investment in private companies, why can't we in the U.S. do this?

This is an invalid presumption. There is not enough evidence of other government investing in private companies. Chile has invested 5-10% in stocks, but the remainder is invested into government bonds. This is an issue where more information is needed over a longer length of time.

17.16 What is meant by privatization of the Social Security system that is being so often talked about?

Privatization of Social Security is the reduction or elimination of Social Security benefits on a perhaps gradual basis and substituting individual accounts with a government guarantee of some minimum benefits.

17.17 Will I soon have the option to take my Social Security with holdings and put them into my 401 (k) plan?

Not under present law.

17.18 If Social Security is privatized, how can we insure that no "for profit" industry will develop as a result of this?

It is probably impossible to ensure that. Private investment firms and advisory firms are "for profit".

17.19 What are the economic implications of investing the trust fund surpluses in the stock market?

Some have proposed investing part of Social Security funds in the stock market as a way to increase investment returns to help pay for Social Security. This change in investment practices, in and of itself, would have very little effect on the economy. The Social Security-investments wouldn't be that large compared to the size of world-wide markets.

17.20 What are the implication of having government as a major stockholder in American business?

There are many untested issues here. There is no simple answer. Plans that call for investments in the stock market generally would model their investment after the Thrift Savings Plan(TSP)--a type of 401(k) plan for federal employees. The TSP has a number of safeguards to protect the interests of the fund and protect businesses having government as an intrusive shareholder. Those safeguards have worked for the TSP for a little over a decade. People differ about whether the experience would be the same with Social Security.

17.21 Would TIAA-CREF be used if privatization is enacted?

Details at this level have not been worked out in privatization plans now being discussed.