The Cost of Uncertainty about the Timing of Social Security Reform

NBER Working Paper No. 21585

Issued in September 2015

NBER Program(s):Economics of Aging, Public Economics



We develop a model to study optimal decision making in the face of uncertainty about the timing and structure of a future event. The model is used to study optimal decision making and welfare when individuals face uncertainty about when and how Social Security will be reformed. When individuals save optimally for retirement, the welfare cost of uncertainty about the timing and structure of reform is just a few basis points of total lifetime consumption. In contrast, the cost of reform uncertainty can be greater than 1% of total lifetime consumption for individuals who do not save.

Acknowledgments

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Document Object Identifier (DOI): 10.3386/w21585

Published: Frank N. Caliendo & Aspen Gorry & Sita Slavov, 2019. "The Cost of Uncertainty about the Timing of Social Security Reform," European Economic Review, . citation courtesy of

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