Chart 1: The Role of Private Accounts in Offsetting Benefit Reductions
Chart 1: The Role of Private Accounts in Offsetting Benefit Reductions Defined Benefits ↓ Notional Account ↓ ← Diverted payroll contributions are double-counted in parallel accounts (during working years) → Private Account ↓ Calculated using inflation-indexing to determine the "bend points" ↓ Accumulates interest at the rate of return on Treasury bonds ↓ ↓ Accumulates interest at the nominal portfolio rate of return less annual fees ↓ ↓ ↓ ↙︎ ↓ ↘︎ ↓ ↓ At Retirement: Annuitized at no cost to provide a constant real monthly benefit ↓ ↓ At Retirement: Partially annuitized to cover the shortfall in the defined benefit after "clawback" (if any) ↓ ↓ At Retirement: Fully annuitized if the account is too small to provide poverty-level of benefits ↓ Upon Death: Passed on to heirs if the defined benefit after "clawback" is sufficient to provide pover...