What Does It Cost To Guarantee Returns?

The brief’s key findings are:

• The financial crisis suggests the need for a new universal tier of retirement saving accounts to supplement Social Security and 401(k)s.

• To prevent large drops in asset values and fluctuations in replacement rates, policymakers might find it desirable to provide guarantees.

• But low guarantees would have had no effect historically.

• And finance theory says that high guarantees are prohibitively expensive.

•  The only way to provide high guarantees is if the government were willing and able to bear more risk than other investors.