Star Wars And Social Security: Personal-investment accounts sound good, but if they're set up, will they actually work?(Business)(President George W. Bush's plan to reform Social Security)(Brief Article)

President Bush's plan for reforming Social Security feels like Star Wars all over again. It's a vast, faith-based shield that sounds as if it protects your retirement years. All you have to do is slip part of your Social Security tax into a private-investment account. Then your troubles are over. Life's little missiles will bounce right off.

Why the Star Wars comparison? Because private accounts are a complex and costly edifice, greatly oversold. No one has shown that they can actually work.

I'm leaving aside all the big-picture questions, such as who gains or loses from private accounts and whether other reforms should be tried instead. It won't even be easy to find the money to finance these accounts, because the scheme needs a huge influx of federal funds. The drop in the current and projected budget surplus, revealed last week, will make it tough to fund anything new.

Practical stuff: But those aren't my subjects. I'm into housekeeping--the practical stuff, such as the cost of signing people up for personal accounts, keeping track of their choices and fixing mistakes. Those chores are more complex than you think, which is what makes the Star Wars analogy apt. If Congress said "Go," would private accounts really do the job?

Believers cite as their model the federal 401(k), known as the Thrift Savings Plan. Social Security, they say, could simply expand that model to cover the country as a whole.

Not likely. The thrift plan serves 2.5 million federal employees. In most cases, $4,900 gets added to their accounts each year. The money goes in automatically, through payroll deduction, and workers can manage accounts online. Even with just one employer, "it was a challenge to get all the agencies singing from the same hymnbook," says Francis Cavanaugh, the plan's former executive director.

Social Security, by contrast, might start with 154 million people and add 5 million names a year. It's dealing with more than 6.5 million employers, almost all of them small. More than 80 percent of them report wages on paper rather than electronically.