WASHINGTON — President Bush believes Americans are so eager to join the "ownership society" that, given a chance, two-thirds of those eligible would divert funds from Social Security into the personal investment accounts he proposes.
But when public employees in seven states were offered the opportunity for similar accounts during the last decade, nowhere near two-thirds signed up for them. In many instances, the figure was closer to 5%.
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 have said is needed for old age. Their poor performance led the Nebraska Legislature two years ago to junk the accounts for new employees.
While Americans are just beginning to grapple with the president's proposal for private accounts, employees and retirement officials in Michigan, Montana, Washington, West Virginia and other states have discovered that the accounts can fall far short of their promise. Their experiences sound a cautionary note for Bush as well as for California Gov. Arnold Schwarzenegger, who has proposed switching public employees to private accounts starting in 2007.
The accounts Bush is proposing are not a precise match to the ones states have offered in recent years. And the low signup rate for accounts among state workers may be partly because 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 some 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 experts to wonder whether most people, even among those who want to make their own retirement investments, have the time or knowledge 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 Sullivan, executive director of the Nebraska Public Employees Retirement Systems, which replaced its private account system with a centrally managed plan in 2003.
