RE: Questions for Sam Beard

[National Dialogue Moderator <moderator>]

Thank you for your thoughtful response.

We need to create a two tiered system in order to provide a
guaranteed minimum retirement income:  no senior or disabled
person should live in poverty.  By using a portion of the
existing payroll tax to create PRAs combined with creative
voluntary savings matches, we can maintain a safety net to
protect the disabled and workers with smaller accounts.  Under a
mature funded system, Tier One (the safety net) will contain
ample money to make up any unexpected shortfalls.

Longevity.  Upon retirement, workers could access their money in
one of two ways.  One option, common in many pension systems, is
to annuitize the account and live off of an indexed percentage of
the principal.  The annuity lasts the lifetime of the retiree or
surviving spouse.  Another option, which may be attractive to
retirees hoping to pass a nest egg on to their children, is to
live off of the income of the account and pass the principal on
to their heirs.

Market Risk.  ES 2000 supports limiting individual choice to the
picking of a government-approved professional investment
manager.  This can neutralize the more conservative investment
patterns of lower-income workers and minimize unsavvy investor
risks.  Investor education must be a cornerstone of American
public policy, particularly related to individual accounts and
Social Security.  Education is the key to creating a nation of
solid investors.

Administrative Cost.  The most credible source, a study by
President Clinton's 1995-1996 Social Security Advisory Council,
showed annual fees ranging from .05% to 1% of annual assets under
management.  This range related to how much control individuals
have over their accounts.  Where individuals have no choice
beyond picking a government-approved investment manager, annual
fees run as low as 1/20th of 1%.  The middle option, where
individuals pick from portfolio options, annual fees run 1/10th
of 1%.  Options providing the most choice allow individuals to
choose stocks and bonds.  Annual fees run up to 1% of assets
under management.

Employer Headaches.  By using the existing Social Security
system, payroll taxes could be collected as they are now.  Once
collected, the funds can be diverted to personal retirement
accounts and funneled through the existing structure.  Efficient
models already exist:  employer 401(k) plans, govenment pension
programs and the Federal Thrift Savings Plan.

Your concerns are significant, and deserve attention from
economic and political experts, but I do think that a successful
two tiered system is quite possible!  Thank you for your
interest.

Sam Beard, Economic Security 2000