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Suppose that the ratio of retirees to working citizens is currently 1 to 5, meaning that there are 5 working people for every retiree.

Suppose that the ratio of retirees to working citizens is currently 1 to 5, meaning that there are 5 working people for every retiree. Suppose that in thirty years the ratio will change to 1 to 2. If benefits remain the same, what will happen to the contribution rate assuming retirees are provided benefits in a pay-as-you-go system? How much would benefits decrease if the contribution rate remained the same?

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Solution In a payasyougo system the contribution rate is the percentage of a workers salary that is set aside to fund retirement benefits The contribu... blur-text-image

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