Revision with unchanged content. Social Security rules have changed constantly since its creation, generating different outcomes across cohorts, race and gender. A look at the history of social security in the US and Germany provides substantial evidence of policy risk in their pay-as-you-go systems. This does not only impose welfare costs on the population, but also has important wealth accumulation and portfolio choice consequences. Using the history of policy changes, estimates of the potential welfare costs to the US population are presented. This book also explores- the effects of policy risk on wealth accumulation, both looking at the effects the 1984 social security reform in the US could have had on individuals' wealth accumulation, as well as using aggregate data to estimate the impact of social security wealth and risk on savings. The evidence obtai-ned suggests that there is an important substitution between social security wealth and financial wealth, and that people exposed to larger policy uncertainties accumulate more financial wealth. Results imply that accoun-ting for policy risk greatly improves our understanding of the real effects of retirement programs.