Abstract
Abstract : The paper analyzes the potential inducement to retire earlier and the effects on lifetime savings in the presence of social security. The framework is a model of intertemporal utility maximization by individuals with endogenous retirement age. Aggregate behavior is examined against two alternative hypotheses. First, payments to and benefits from social security are equal for each generation. Second, a system based on a 'pay-as-you-go' principle which allows for intergenerational transfers. Among the issues analyzed: the possibility of multiple equilibria; the effects on the optimum retirement age and on the optimum wealth-income ratio at retirement of changes in the 'replacement ratio' and the effects of changes in the population long-run growth rate on implied tax-rates. (Author)
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