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...

The standard approach to welfare analysis under dynamically inconsistent preferences is to assume that the welfare of an individual is maximized if he can commit to his initial goal. We study a potential rationale for such welfare analysis. In some prominent, well-studied examples with...

The Save More Tomorrow plan has proven effective at raising employee saving rates and appears to be popular among participants and the media. An important question has remained on the minds of economists despite this success: just how close does the prescriptive SMarT plan come to approximating...

We interact two prominent behavioral mechanisms of time inconsistency that have been used to study inadequate saving: hyperbolic discounting and short-term planning. Hyperbolic discounting is a conventional way to model impulsive decision making, and short planning horizons have been used to...

In this paper we propose a new strategy for comparing the behavior of a hyperbolic discounter who possesses self-control problems to an exponential discounter who does not. Our strategy controls for inherent differences in overall levels of impatience across discount functions, which thereby...

We revisit the role of social security in countering inadequate saving for retirement. We compute the optimal social security tax rate for households who lack the computational ability to solve dynamic optimization problems. Instead, they follow the simple rule of thumb of consuming and saving a...

While standard models assume households have no trouble planning for retirement, some researchers have argued that households vary in their propensity to plan and that the degree of retirement planning is a key determinant of household saving (Lusardi and Mitchell 2007). As a result, there is...

Uncertainty about the timing of retirement is a major financial risk with implications for decision making and welfare over the life cycle. We estimate that the standard deviation of the difference between retirement expectations and actual retirement dates ranges from 4.28 to 6.92 years. We...

We model the effect of government bailouts on portfolio choices and welfare. Banks sell bonds to leverage investment in risky projects and households buy bonds under rational expectations about default risk. Bailouts induce greater leverage but reduce equilibrium interest rates. The interest...

Uncertainty about the timing of retirement is a major financial risk with implications for decision making and welfare over the life cycle. We estimate that the standard deviation of the difference between retirement expectations and actual retirement dates ranges from 4.28 to 6.92 years. We...