Social Security as a Financial Asset: Gender-Specific Risks and Returns

27 Pages Posted: 16 Jun 2001 Last revised: 6 Oct 2022

See all articles by Marianne Baxter

Marianne Baxter

Boston University - Department of Economics; National Bureau of Economic Research (NBER)

Date Written: June 2001

Abstract

Social Security is a financial asset whose 'purchase' is compulsory for most working individuals; the return during the individual's working lifetime is related to the rate of change of aggregate labor income. If an individual's labor income is strongly related to aggregate labor income, then the Social Security asset is a particularly unattractive asset. In this situation, the individual would benefit from a reformed Social Security system that would permit investment of retirement funds in other financial assets. This paper investigates how this aspect of Social Security risk varies across groups of individuals who differ according to gender; education; race; and age. The main finding is that there are important differences across groups in this component of Social Security risk, as captured by the sensitivity of individual-level income growth to changes in the SSWI. This element of risk is most important for women, especially women who are young-to-middle aged and with more education. This analysis suggests that women would have more to gain, compared with men, from a reformed Social Security system.

Suggested Citation

Baxter, Marianne, Social Security as a Financial Asset: Gender-Specific Risks and Returns (June 2001). NBER Working Paper No. w8329, Available at SSRN: https://ssrn.com/abstract=273697

Marianne Baxter (Contact Author)

Boston University - Department of Economics ( email )

270 Bay State Road
Boston, MA 02215
United States
617-353-2417 (Phone)
617-353-4143 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States