In a model where most taxpayers hold debt and face intermediation costs, returns on pension assets are less than taxpayers' cost of borrowing. Pension funding is costly and hence zero funding is optimal. The model also implies that unfunded pension promises are properly discounted at a rate...

Retirement savings decisions should depend on expectations of Social Security retirement income. Persons may be uncertain of their future Social Security benefits for several reasons, including uncertainty about their future labor earnings, the formula now determining social security benefits,...