OutSMarTing the Social Security Crisis
We present a rule-of-thumb consumption model with participation in a ``Save More TomorrowTM'' (SMarT) plan, and we analytically derive the fraction of life-cycle wage increases that must be saved to offset a reduction in social security benefits resulting from an aging population (holding taxes fixed and maintaining a balanced social security budget). We find that this ``critical'' SMarT rate is quite low, and much lower than the rate that participants actually used in real-world pilot implementations. This finding generally continues to hold even if wage growth is slow, even if the real return on private saving is low or extremely volatile, and even if enrollment in a SMarT plan is delayed until late in the life cycle. Moreover, we show that participation in a SMarT plan can improve lifetime utility.
Volume (Year): 35 (2007)
Issue (Month): 6 (November)
|Contact details of provider:|
When requesting a correction, please mention this item's handle: RePEc:sae:pubfin:v:35:y:2007:i:6:p:647-668. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (SAGE Publications)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.