Here's an article, part of which refers to Mr. Shiller.
Desperate critics of personal accounts, tired of being caught fibbing about actual investment experience, have switched to hypothetical estimates of future investment returns. To make these hypothetical returns as low as possible, they first assume no more than half is invested in the stock market.
Jonathan Weisman of The Washington Post cites figures from Robert Shiller concerning a "life cycle" account that would have only 15 percent in stocks by age 60. Since Shiller calculates that U.S. stocks have long earned 6.8 percent a year in real terms, after adjusting for inflation, while bonds earn a more-variable 3 percent, any life cycle plan requiring a tiny share in stocks after middle age guarantees a low median return of only 3.4 percent. That is, he notes, "considerably below the 4.6 percent that the Social Security actuaries have assumed," because the actuaries assumed 50 percent in stocks (which is also much too low most of the time).
Weisman neglected to mention that Shiller found, "Workers could do better, of course, if they eschewed the life cycle accounts and went for 100 percent stocks. In this case ... the median net account is ... 10 times as large as with the baseline life cycle account. ... Workers who choose the 100 percent stocks option lose only 2 percent of the time."
In 1999, when Bill Clinton was president, Shiller appeared more worried about overtaxing younger people to subsidize retiring baby boomers. "We should do more yet to encourage saving," he wrote; "The younger people already have their own income concerns and needs without also having to bear the burden of the risks of the retired."
Shiller's figures reveal one genuine risk with personal accounts -- namely, that Congress might allow people too little choice between stocks and bonds. A 50-50 stock-bond split was originally mandated for 529 college savings plans, which has now been wisely scrapped. The notion that bonds are safer than stocks is a particularly risky illusion. Indeed, Shiller's study shows, "the outcome of a portfolio of 100 percent bonds is terrible. The final balance is negative 89 percent of the time." The value of bonds falls when interest rates rise, so investors in "safe" U.S. Treasury bonds have frequently been clobbered by big capital losses.
cut for brevity....and the article ends..
In the future, the relative payback from a lifetime of paying Social Security taxes will get much worse: "Since those people retiring in 2003 have not always paid into the system at the current high rate of 12.4 percent, their average tax rate is only 10.7 percent, assuming 40 years of work. This average tax rate will increase in later years, as future retirees have fewer years paid in at lower tax rates and more years paid in at higher rates."
Whenever economists or journalists pretend that Social Security offers a better or safer return than the stock market, just remember Don Luskin's apt phrase about "the conspiracy to keep you poor and stupid."
100% stocks, anyone??