Question

6. The Social Security system provides income for people
over age 65. If a recipient of Social Security decides to
work and earn some income, the amount received in
Social Security benefits is typically reduced.
a. How does the provision of Social Security affect
people's incentive to save while working?
b. How does the reduction in benefits associated with
higher earnings affect people's incentive to work
past age 65?
7. A 1996 bill reforming the federal government's anti-
poverty programs limited many welfare recipients to
only two years of benefits.​

Answer 1

A. The provision of Social Security gives people the incentive to save (more/less) while working. Moreover, the reduction in benefits associated with higher earnings gives people the incentive to (work/not work) past age 65.

B. Moreover, the reduction in benefits associated with higher earnings gives people the incentive to (work/not work) past age 65. This means that even if an individual hasn't been saving for retirement while working, he can still count on Social Security benefits to support himself through the retirement years.