Theoretical Economics Letters, 2018, 8, 3481-3491 http://www.scirp.org/journal/tel ISSN Online: 2162-2086 ISSN Print: 2162-2078 Social Security, Retirement and Economic Growth Kuo-Ting Hua Department of Economics, National Chi Nan University, Taiwan Abstract Population aging alters decisions of retirement and intergenerational trans- fers simultaneously. With the consideration of both decisions, this paper in- vestigates the economic impacts of population aging in an Overlap- ping-Generation (OLG) model under social security coverage. Results show that the economy grows slower with voluntarily increased elderly labor supply than otherwise. Ignoring the interactions between these decisions may lead to a serious mis-estimation. Results also show that mandatory postpon- ing retirement creates disincentive to saving and hinders the economy. To prevent the economy from slowing down and fertility from falling, mandato- ry postponing retirement must be accompanied by a lower replacement ratio. Keywords Retirement, Fertility, Social Security, Growth 1. Introduction Over the last few decades, people are getting worried about the changes posed by the burden of population aging on the working generation and eventually on the economy. With population aging, working parents choose to postpone their re- tirement [1] [2] [3]. With additional labor supply from the elderly, the economy grows faster. However, under Pay-As-You-Go (PAYG) social security coverage, working parents pay more social security tax for the elderly and save more for their retirement while spending less on their children [4] [5] [6] [7] [8]. The economy grows slower because of the loss of education investment. These two independent lines of literature conclude differently on the economic perfor- mance. Figure 1 depicts impacts of population aging in OECD countries. Notice that retirement age is increasing and fertility and education investment percentage How to cite this paper: Hua, K.-T. (2018) Social Security, Retirement and Economic Growth. Theoretical Economics Letters, 8, 3481-3491. https://doi.org/10.4236/tel.2018.815214 Received: October 15, 2018 Accepted: December 2, 2018 Published: December 5, 2018 Copyright © 2018 by author and Scientific Research Publishing Inc. This work is licensed under the Creative Commons Attribution International License (CC BY 4.0). http://creativecommons.org/licenses/by/4.0/ Open Access DOI: 10.4236/tel.2018.815214 Dec. 5, 2018 3481 Theoretical Economics Letters