'Early retirement and lax eligibility for disability are bad for the economy because they reduce labor productivity and the supply of experienced workers, and they are bad for the system because they impose a heavy financial burden that makes it nonsustainable.' Costa Rica is at a turning point with respect to its social security system. While half the work force is covered and beneficiaries have fared well in the past, the pay-as-you-go (PAYG) pension system is unsustainable for the future. This publication describes the present pension system, its shortcomings, and defends the need for urgent reform. It also makes recommendations on how to reform the system, what should be changed first, and exactly what areas of the pension system should be modified.