The United States pension system and economic theory
DOI:
https://doi.org/10.15584/nsawg.2024.4.5Keywords:
pension system, Social Security, 401(k), economic theory, resource redistribution, welfare economicsAbstract
The aim of this paper is to analyse the United States pension system in the context of economic theory, including resource redistribution, welfare economics, and overlapping generations (OLG) models. This system, based on public social insurance (Social Security) and private savings plans such as 401(k) and IRA, represents a diversified approach to retirement security. The analysis
demonstrates that the combination of pay-as-you-go and capital-based elements enables greater flexibility and efficiency in adapting the system to changing demographic and economic conditions.
The findings indicate that Social Security plays a pivotal role in providing a basic retirement income, supporting social and redistributive goals, while private savings plans promote individual responsibility and efficient resource allocation. In the context of welfare economics and OLG models, capital-based systems are more efficient in economies where market interest rates exceed
population growth rates. However, private savings mechanisms carry risks associated with market volatility, necessitating additional regulatory measures and educational support.
The article highlights the importance of pension system flexibility in addressing challenges related to population aging and changing economic conditions. The U.S. pension system may serve as an inspiration for further research into the efficiency of various financial mechanisms and their impact on fiscal stability and social welfare.
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