States' private account record casts doubt on Bush plan

WASHINGTON -- President Bush thinks Americans are so eager to join the ''ownership society" that, given the opportunity, two-thirds of those eligible would divert funds from Social Security into the personal investment accounts he proposes. But when public employees in a half-dozen states were offered the opportunity for similar accounts in the past decade, nowhere near two-thirds signed up for them. In many instances, the number was closer to 5 percent.

Bush has argued in campaign-style events from Fargo, N.D., to Blue Bell, Pa., that Social Security account holders could make more money for retirement on their own than they can count on from the New Deal-era fixed-benefit program.

But when Nebraska's state and county workers were given do-it-yourself accounts, they made so many investment errors that they ended up making less than colleagues with fixed-benefit pensions -- and less than what analysts said they needed for old age. Their poor performance persuaded the Nebraska Legislature two years ago to junk the accounts for new employees.

While Americans are beginning to grapple with the president's proposal for private accounts, employees and retirement officials across the nation have found that the accounts can fall far short of their promise. Their experiences sound a cautionary note.

The accounts Bush is proposing are not a precise match for the ones states have enacted in recent years. And the low sign-up rate for accounts among state workers may be due in part to the fact that more of them are covered by generous pensions than are American workers generally, so they may feel less need for the accounts.

But the tepid response to accounts in so many places casts doubt on one of the central premises of the Bush plan: that Americans are clamoring to join the investor class.

The poor performance of many of the accounts leaves specialists to question whether -- even among individuals who want to invest -- most have the time or aptitude to do so successfully.

''If people have private accounts in Social Security, and they're left to make the decisions themselves, the results likely will not be positive," said Anna D. Sullivan, executive director of the Nebraska Public Employees Retirement Systems, which replaced its private account system with a centrally managed plan at the start of 2003.

''The vast majority of people don't have the inclination or comfort level to be responsible for their own retirements," said Joseph Jankowski, executive director of the West Virginia Consolidated Public Retirement Board, where officials are debating whether to drop the state's private account plan, as Nebraska did.

Bush's plan assumes that two-thirds of working Americans younger than 55, an estimated 90 million people, would quickly shift a substantial chunk of the payroll tax money that goes to Social Security into private investment accounts beginning in 2009. (Those 55 or older would not be eligible for the accounts.)

But of more than 1.5 million public employees offered the choice of accounts at various points in the past decade, only about 125,000, or 8 percent, have signed up. The lion's share of those were during the stock market boom of the late 1990s. The sign-up rate in most states has been about 5 percent. White House aides said the two-thirds estimate was based on a Social Security Administration analysis in 2001 of an account arrangement similar to, if somewhat more generous than, Bush's current proposal.