Review of Economic Dynamics 48: 320-344

Earlier draft:  Federal Reserve Bank of Richmond Working Paper 20-09

April 2023

Appendices and Replication Materials

Abstract.  Using a heterogeneous agent, life-cycle model of Social Security claiming, labor supply and saving, we consider the implications of lifespan inequality for Social Security reform. Quantitative experiments show that welfare is maximized when baseline benefits are independent of lifetime earnings, the payroll tax cap is 50% larger than its current level, and claiming adjustments are reduced. The Social Security system that would maximize welfare in a ``2050 demographics'' scenario, characterized by longer lifespans and an increased education-mortality gradient, is similar to the one that would maximize welfare today.