Is an assumption of bounded rationality needed to explain Social Security and other mandatory pension plans? In this contribution we argue that when rational agents hold inconsistent expectations such programs may be justified. Two of the features that distinguish Social Security and many other...

This paper examines how two instruments—annuities with lifelong benefits purchased using defined contribution (DC) plan assets, and social security annuities—should be considered jointly to optimize household lifetime wellbeing. Understanding how these interact is of key importance in order...

Social Security trust fund portfolio diversification to include some equities reduces the equity premium by raising the safe real interest rate. This requires changes in taxes. Under the hypothesis of constant marginal returns to risky investments, trust fund diversification lowers the price of...