Abstract
A leading rationale for the operation of a social security program is that it remedies the insufficient saving for retirement that occurs because of impulsive spending. An innovation of this study is that I construct a model of life-cycle decision making that features time-inconsistent dynamic optimization that is triggered as a result of impulsive consumption spending. I demonstrate both analytically and quantitatively that a social security program can indeed remedy impulsive consumption spending and that it can improve life-cycle well-being, if the idea of an impulsive consumer is conceptualized as an intra-temporal tension between saving optimally and saving too little, which fits within the general context of a naive dual self from psychology. These results stand in contrast to a recent literature which reports that it is difficult for a social security program to remedy the impulsive spending that results from the conventional channel of hyperbolic discounting, at least in the absence of sizable credit market frictions.