- The Washington Times - Friday, July 5, 2002

Alan Reynolds' suggestion (“Pension Pirates,” Commentary, June 24) that my study on the decline of retirement wealth makes a case for privatizing Social Security is flawed and deceptive.

The purpose of my study, “Retirement Insecurity,” (funded by the Retirement Research Foundation, to further correct Mr. Reynolds' misinformation) was to measure how well people now nearing retirement age can expect to do in retirement. The surprising finding in this research was that despite the boom times on the stock market, retirement income adequacy declined from 1989 to 1998.

The key to understanding this trend is to look at the middle, or median, rather than at average wealth, a number that is skewed by the tremendous growth in wealth among the very few at the highest reaches of the income scale. From 1983 to 1998, only households with net worth of $1 million or more gained retirement ground, and even though 401(k) plans increased by nearly 1,000 percent during this time, the number of Americans with private pension coverage remained largely unchanged.

My study shows that, unlike the more speculative private investment options, Social Security offers virtually universal coverage and is a solid foundation on which to lay additional retirement building blocks that include private savings and investments.

If Mr. Reynolds wants to better understand the potential pitfalls of privatizing Social Security, he should listen to an Enron worker whose retirement was riding on a 401(k).


Department of Economics

New York University

New York

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