This article deals with the same subject matter as the required reading entitled "The Outlook: As Populations Age, Fiscal Woes Deepen".  As was noted in the discussion question for that reading, the United States currently has an unfunded Social Security system. Under such a system, contributions by current workers are immediately paid out to current retirees. The system accumulates only a small buffer stock of assets to meet discrepancies in the timing of receipts and payments. (Actually, the U.S. system is becoming partially funded in the sense that it is now accumulating some assets that will be liquidated during the first half of the next century as the baby boom retires and begins collecting benefits. This effect is transitory, and there are no current plans to convert to a fully funded system.) In what way is an unfunded Social Security system like government debt? Why might such a system be bad for the economy?

This article provides additional information on the Chilean social security system and the transition from a U.S.-type unfunded system to the current system of individual retirement accounts.