FHCE 4270E/6270E

Case Study 1

Summer 2019

Case Study 1

There is a concern that our social security is grossly under

–

funded and is expected to run out of

money as the baby

–

boomers (the largest age cohort in our population comprising

of people born

between 1946 and 1964) continue to retire in record numbers. Currently the contributions to social

security are:

ï‚·

6.2% OASDI: Employer+ 6.2% Employee

o

Upto $128,400.

ï‚·

1.45% towards Medicare: Employer + Employee

ï‚·

The proposed solutions a

vailable are one, all, or a combination of the following:

o

Privatization of social security, either entirely or partially, as has been done in

Australia, Chile and other countries

o

Increasing contribution limits from 6.2% per individual to a proposed hig

her

percentage

o

Postponing the Eligibility Age for social security

ï‚·

The social security administration has hired you to recommend to them a solution to reduce

t

he risk of running out of social security from a behavioral economic perspective.

ï‚·

From a behavioral economic standpoint make your recommendation using the behavioral

economic tools learned in class.

ï‚·

Justify how your recommendations will be more effective from a psychological standpoint.

ï‚·

Explain how your proposed recommendation will

be easier to implement. Think of applying

some of the tools

—

default option, endowment effect, framing, salience, and other concept,

that you have learned in the course so far to develop a proposed recommendation.

There is no right or wrong answer for thi

s. You will be evaluated based on how well you were

able to apply some of the behavioral economic concepts into your pro

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