Simulating a Worst Case Social Security Model
Kenji L Logie
Modeling Simulation Final Project
Simulating a Worst Case Social Security Model System of Interest For the purpose of this simulation a simplified worst case social security model was created for a developing country’s social security program. The program simulates how long it would take this new social security program to go bankrupt, if it earns no interest on its capital, and its only source of paying out benefits is members’ monthly contributions and its initial capital of $750,000. This model only deals with paying into the social security for the purpose of retirement benefits. Persons pay into the social security program at one of three possible earning levels monthly. This would lead to one of three possible payouts of benefits monthly for persons 60 years or older. Simulating the point of bankruptcy begins at the third part of the program when the organization has built up capital over a period of time, which is defined within the simulation as the contribution only period without paying out any benefits. At the end of the contribution only period it begins to pay out benefits to anyone in the simulation eligible to receive benefits which by definition is a members who is 60 years or older. Events and System Variables Events: a new person joins the work force, payment of benefits, and receiving contributions
Page 1 of 20
Kenji L Logie
Modeling Simulation Final Project
System State variables: c- Social Security capital, n- Maximum number of persons in the system at that point in time t- Time Discrete Event Simulation The simulation represents a discrete event simulation. The events all take place chronologically, and represent state changes at a particular point in the simulation. The simulation begins with the creation of a fixed number of persons, and the time at which a new person joining the workforce is generated from an exponential distribution to move time forward. This step is followed by generating more times
Modeling Simulation Final Project
Simulating a Worst Case Social Security Model System of Interest For the purpose of this simulation a simplified worst case social security model was created for a developing country’s social security program. The program simulates how long it would take this new social security program to go bankrupt, if it earns no interest on its capital, and its only source of paying out benefits is members’ monthly contributions and its initial capital of $750,000. This model only deals with paying into the social security for the purpose of retirement benefits. Persons pay into the social security program at one of three possible earning levels monthly. This would lead to one of three possible payouts of benefits monthly for persons 60 years or older. Simulating the point of bankruptcy begins at the third part of the program when the organization has built up capital over a period of time, which is defined within the simulation as the contribution only period without paying out any benefits. At the end of the contribution only period it begins to pay out benefits to anyone in the simulation eligible to receive benefits which by definition is a members who is 60 years or older. Events and System Variables Events: a new person joins the work force, payment of benefits, and receiving contributions
Page 1 of 20
Kenji L Logie
Modeling Simulation Final Project
System State variables: c- Social Security capital, n- Maximum number of persons in the system at that point in time t- Time Discrete Event Simulation The simulation represents a discrete event simulation. The events all take place chronologically, and represent state changes at a particular point in the simulation. The simulation begins with the creation of a fixed number of persons, and the time at which a new person joining the workforce is generated from an exponential distribution to move time forward. This step is followed by generating more times