How Should America Prepare Its Senior Citizens for Retirement?

Matt Yglesias thinks that private investment is alright as it goes but not the best way to insure a national population against insecurity in retirement:

The kind of “savings” that it makes sense for typical working and middle class households to engage in is the sort that banks offer with demand deposit accounts…But the best way to “save” for retirement is to live in a country with a properly functioning Social Security system.

…no firm is nearly as big or durable as the entire United States of America so it would have made a lot of sense to address the substantial problems with defined benefits pensions by moving to a bigger Social Security program. Instead we moved in the opposite direction, turning tens of millions of middle class Americans into “retail investors” who don’t know what they’re doing and don’t save enough.

The result is nice, I guess, for the guys who collect the management fees and print the 401(k) brochures but…it doesn’t work as a way of ensuring that people have adequate financial resources in old age, and the idea that a mass market of retail investors ineptly attempting to maintain a balanced diverse portfolio serves a useful role in steering capital to productive uses doesn’t pass the laugh test.

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