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One way to see the differences in incentives by age in the system is to compare pension wealth for workers of different ages in 1997. Table 1 displays the real present value of pension wealth by wage level for male workers of different ages in 1997, all of whom began working at age 25 and expect to continue working until age 60, assuming real wages are constant over their lifetimes. Numbers in italics indicate where the PRA pension is more valuable than the PAYGO pension.

Table 1.
Pension Wealth Simulation, by Age in 1997, Male Worker with 35 Years of Expected Contributions
Real Daily Wage
Age in 1997Years of Expected PRA ContributionsPlan431002003005001079
25 35 PRA 398.6 815.0 1,626.2 2,437.3 4,059.7 8,751.9 
  PAYGO 398.6 398.6 603.8 890.2 1,483.6 3,200.1 
30 30 PRA 398.6 523.4 1,044.3 1,565.3 2,607.1 5,620.5 
  PAYGO 398.6 398.6 603.8 890.2 1,483.6 3,200.1 
35 25 PRA 398.6 398.6 659.1 987.8 1,645.3 3,546.9 
  PAYGO 398.6 398.6 603.8 890.2 1,483.6 3,200.1 
40 20 PRA 398.6 398.6 403.9 605.4 1,008.4 2,173.9 
  PAYGO 398.6 398.6 603.8 890.2 1,483.6 3,200.1 
45 15 PRA 398.6 398.6 398.6 398.6 586.6 1,264.7 
  PAYGO 398.6 398.6 603.8 890.2 1,483.6 3,200.1 
50 10 PRA 398.6 398.6 398.6 398.6 398.6 662.6 
  PAYGO 398.6 398.6 603.8 890.2 1,483.6 3,200.1 
55 PRA 398.6 398.6 398.6 398.6 398.6 398.6 
  PAYGO 398.6 398.6 603.8 890.2 1,483.6 3,200.1 
Real Daily Wage
Age in 1997Years of Expected PRA ContributionsPlan431002003005001079
25 35 PRA 398.6 815.0 1,626.2 2,437.3 4,059.7 8,751.9 
  PAYGO 398.6 398.6 603.8 890.2 1,483.6 3,200.1 
30 30 PRA 398.6 523.4 1,044.3 1,565.3 2,607.1 5,620.5 
  PAYGO 398.6 398.6 603.8 890.2 1,483.6 3,200.1 
35 25 PRA 398.6 398.6 659.1 987.8 1,645.3 3,546.9 
  PAYGO 398.6 398.6 603.8 890.2 1,483.6 3,200.1 
40 20 PRA 398.6 398.6 403.9 605.4 1,008.4 2,173.9 
  PAYGO 398.6 398.6 603.8 890.2 1,483.6 3,200.1 
45 15 PRA 398.6 398.6 398.6 398.6 586.6 1,264.7 
  PAYGO 398.6 398.6 603.8 890.2 1,483.6 3,200.1 
50 10 PRA 398.6 398.6 398.6 398.6 398.6 662.6 
  PAYGO 398.6 398.6 603.8 890.2 1,483.6 3,200.1 
55 PRA 398.6 398.6 398.6 398.6 398.6 398.6 
  PAYGO 398.6 398.6 603.8 890.2 1,483.6 3,200.1 

Values are real present discounted value of the future stream of pension benefits in thousands of 2002 pesos, for a male worker who began contributing at age 25 and expects to continue until age 60. Numbers in italics indicate that a personal retirement account (PRA) has a higher expected payoff than the prereform pension (PAYGO). Average 2002 exchange rate: 9.66 pesos/dollar. Forty-three pesos is real daily minimum wage (in Mexico City) in 1997, and 1,079 pesos is the topcode we impose (corresponding to the lowest real value of IMSS topcode over study period). See sections IIB and IIC and appendix A.6 for further details.

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