[Cboldt]

A pay as you go welfare social safety net program, which is what SS really is, does not pose a moral hazard. A private account, which if it fails, and leaves the investor too poor, will cause the government to just give the investor his old benefits under the old system, is a tails the investor wins, heads the government (taxpayer) loses, proposition. That becomes the moral hazard.

How about mandatory purchase of government bonds? The payment in can be used to pay for present beneficiarries, and the private holder of bonds has something to pass on to his heirs if he outlives the purchase. It's not a private account in the sense that its success depends on any company's business success, but it is a private account in that the value of the government bonds accrues to an identifiable individual buyer.

[Torie]

That strategy, ie the all bond strategy, would guarantee a slight diminution of benefits, for reasons explained above. This pass on to your heirs stuff really only applies if you die before retirement. When you retire, you must purchase an annuity to cover the existing benefit levels, which only makes sense. You don't want to play longevity roulette. That would be the ultimate moral hazard. Sure, if you die early, and can pass the assets on, that's great, but that is an additional cost to the system, which needs to be paid for somewhere else. Right now those that die early help pay for those that live to a ripe old age.