This paper proves that the stock-bond portfolio choice of the Social Security trust fund is equivalent in general equilibrium to the tax treatment of capital income by the non-social security part of government. A larger [smaller] share of social security's portfolio invested in stocks is...

This paper re-examines the classic question of how a household should optimally allocate its portfolio between risky stocks and risk-free bonds over its lifecycle. We show that allowing for the wage indexation of social security benefits fundamentally alters the optimal decisions. Moreover, the...

"The NBER Bulletin on Aging and Health provides summaries of publications like this. You can sign up to receive the NBER Bulletin on Aging and Health by email. This paper re-examines the classic question of how a household should optimally allocate its portfolio between risky stocks and...