The disappearance of the defined-benefit (DB) pension plan is one of the greatest
financial tragedies to befall the U.S. citizen. As demographics have changed and
as defined-contribution (DC) plans have become the primary vehicles for
retirement savings, retirement planning has become fraught with uncertainty.
This article argues that DB plans, such as the U.S. Social Security system, are
fundamentally superior to DC plans and that the Social Security crisis is
largely a crisis of demographics and funding. Social Security’s assets
should be invested in a single portfolio that holds both stocks and bonds, and
its risky return should be swapped for a fixed return to enable the provision of
a DB. This proposal inexpensively affords insurance against a market decline and
allows pensions of any kind to be made portable.