Social Security Bulletin, Vol. 63 No. 2

This article summarizes an analysis of the poverty implications of repealing the retirement earnings test (RET). Repealing the RET at the normal retirement age or older is unlikely to generate large poverty effects. Removing the test at age 62 or older, however, could lead to large increases in poverty.

This article examines the recent trends in the size and performance of the equity investments of state and local pension plans. It also provides a context for the discussion about investing some portion of the Social Security trust fund reserves in private equities.

The new, partially privatized social security system adopted by Chile in 1981 has since been implemented, with some variations, in a number of Latin American and old-world transition economies with either a single- or multi-tier system. That alternative to a pay-as-you-go system is sometimes advocated as a desirable model for solving problems in developed systems, such as that of the United States. This article describes the new programs in Latin America, their background, and similarities and differences among them.

High stock prices, together with projected slow economic growth, are not consistent with the 7.0 percent return that the Office of the Chief Actuary has generally used when evaluating proposals with stock investments. Routes out of the inconsistency include assuming higher GDP growth, a lower long-run stock return, or a lower short-run stock return with a 7.0 percent return on a lower base thereafter. In short, either the stock market is overvalued and requires a correction to justify a 7.0 percent return thereafter, or it is correctly valued and the long-run return is substantially lower than 7.0 percent (or some combination of the two). This article argues that the former view is more convincing, since accepting the "correctly valued" hypothesis implies an implausibly small equity premium.