Social Security reform with heterogeneous mortality

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