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    Suppose that the following Social Security reform became law

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    Suppose that the following Social Security reform became law: All current Social Security recipients will continue to receive their benefits, but no increase will be made other than cost-of-living adjustments; U.S citizens between age 40 and retirement not yet on Social Security can opt to continue with the current system: those who opt out can place what they would have contributed to Social Security into one or more government-approved mutual funds; and those under 40 must place their contributions into one or more government-approval mutual funds.

    a. Who will be in favor of this reform and why?

    b. Who will be against this reform and why?

    c. What might happen to stock market indexes?

    d. What additional risk is involved for those who end up in the private system?

    e. What additional benefits are possible for the people in the private system?

    f. Which firms in the mutual fund industry, might not be approved by the federal government and why?

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    Solution Preview

    Hi there,

    Here are your answers:

    a. The people that would be in favor of this reform are those that feel that the government should not have their hands in this kind of business, that social security should be handled by experts ...