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WORK LONGER, SAVE MORE, AND RETIRE WITH CONFIDENCE
Rudi Dornbusch discovered that as populations age, the economic cost of supporting retirees rises ("And you thought Social Security was in trouble...," Economic Viewpoint, Aug. 28). But he implies that the higher cost can somehow be avoided if we'd all just put more money into defined-contribution pension plans.
By itself, however, that would not reduce the fraction of our national income that must go to support the aged in future years. Nor will it insulate world capital markets from the impact that Dornbusch fears: Any reduction in future government borrowing would be more than offset by the cashing out of the assets accumulated by the future retirees.
Aging societies can avoid sizable increases in the burden of supporting their retirees only by requiring longer careers or reducing the relative living standards of those who reach retirement age. No amount of shuffling of financial assets can hide that simple truth.
Lawrence H. Thompson