Education, Marriage, and Social Security

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Prasanthi Ramakrishnan, Washington University in St. Louis

The optimal design of the retirement system has been a topic of discussion in the last few decades, primarily due to the current financial state of the Social Security system. However, the retirement system, set up in the year 1935, was based on the society that existed then of ‘single-earner’ couples, where there is household specialization with one spouse participating in market work and the other spouse in home production. Given the sharp decline in marriage rates as well as a rise in female labor force participation, this paper seeks to answer two main questions: (a) how does incorporating education and marriage responses to retirement policy change the optimal tax and retirement policy? (b) will the current system make the GenX (born in 1970-1979) worse off than the Silent generation (born in 1940-1949)?