Document Type


Publication Date

Fall 2001


This article considers administrative issues that bear on the structure and implementation of any universal, mandatory system of personal accounts within the Social Security system. The central issues involve tradeoffs between relatively standardized, low-cost options with constrained individual choice and limited risk, on the one hand, and more flexible, higher-cost options with enhanced opportunities for individual control and greater risk, on the other hand. A centralized system modeled on the Thrift Savings Plan for federal employees could balance these goals by offering participants a relatively narrow range of investment and withdrawal options, with correspondingly low administrative costs and limited risks. Alternatively, a decentralized system could offer a broader range of options, coupled with higher costs and greater risks. Ultimately, the choice between these approaches reflects controversial judgments about values and politics. It is imperative that the inevitable tradeoffs be carefully considered at the outset and not left to be resolved at some indefinite future time. It is also important to understand that the federal government would undoubtedly have a substantial and continuing role even in a privatized Social Security system.