A unique multiperiod data set is used to look at the income distribution effects of the retirement portion of the social security system of Panama. While it is clear that the system is an important source of income for workers, it is argued that its true redistributive importance is greatly exaggerated. Using a multiperiod view it is found that previously high-wage and urban workers are disproportionately represented among current recipients. It is also argued that social security has substantially reduced the work effort of these workers. Hence the appropriateness of the present social security system is questioned on both equity and efficiency grounds.