Research that I and others have conducted shows that a mixed system that combines the existing PAYG system with a small investment-based component can achieve a higher expected level of benefits with little risk of lower benefit levels.
The current structure of pension systems in most developed countries cannot be sustained without cutting benefit levels substantially or introducing much higher taxes. A shift to a mixed system that combines the stability of the PAYG benefits with the higher return of market-based investments would permit countries to avoid that choice altogether.
Martin Feldstein, professor of economics at Harvard University and president emeritus of the National Bureau of Economic Research, chaired President Ronald Reagan’s Council of Economic Advisers from 1982 to 1984. In 2006, he was appointed to President Bush's Foreign Intelligence Advisory Board, and, in 2009, was appointed to President Obama's Economic Recovery Advisory Board. Currently, he is on the board of directors of the Council on Foreign Relations, the Trilateral Commission, and the Group of 30, a non-profit, international body that seeks greater understanding of global economic issues.