What does it cost to guarantee returns?

Abstract

The brief's key findings are: (1) The financial crisis suggests the need for a new universal tier of retirement saving accounts to supplement Social Security and 401(k)s. (2) To prevent large drops in asset values and fluctuations in replacement rates, policymakers might find it desirable to provide guarantees. (3) But low guarantees would have had no effect historically. (4) And finance theory says that high guarantees are prohibitively expensive. (5) The only way to provide high guarantees is if the government were willing and able to bear more risk than other investors.