NCPA - National Center for Policy Analysis

Federal Workers Already Enjoy Privatized Retirement Plan

October 12, 2000

The proposal to allow workers to invest part of their Social Security payroll taxes in stocks or bonds is not a radical, wild-eyed idea -- as critics make it out to be. In fact, the federal government already runs such a retirement income program for its employees, including members of Congress and federal judges.

It's called the Thrift Savings Plan.

  • It offers a choice of stock or bond funds or Treasury securities to workers who contribute through payroll deductions.
  • Created by Congress in 1986, the plan had assets of $95 billion at the end of 1999.
  • The stock fund's return of 13.19 percent for the year ended September 30 puts to shame the 3 percent earned by the Social Security trust fund in the same period.
  • The fact that the American stock market has appreciated in every 20-year period in its history acts as a guarantee of the fund's resources -- and destroys the argument that a similar privatization of Social Security would be too "risky."

Contrary to another common charge, Wall Street would not be getting a windfall under such a plan. The new investments would be around $60 billion a year, a minute fraction of the $25 trillion now invested in financial markets.

Source: Donald B. Marron (Paine Webber Group), "A Safe Rescue for Social Security," New York Times, October 12, 2000.


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