What Is the Insurance Value of Social Security by Race and Education?

Gal Wettstein, Karolos Arapakis and Yimeng Yin

Issues in Brief from Center for Retirement Research

Abstract: The value of Social Security’s retirement program to individuals is often measured by comparing expected benefits to payroll taxes. But this approach ignores the program’s insurance value, which is larger for those with more uncertain lifespans. The analysis estimates the insurance value using a lifecycle model for stylized households by race, education, and marital status. Accounting for insurance value, the results show that the program is significantly more valuable than lifetime taxes for almost all household types. Social Security’s insurance component also increases racial equity, because lifespans vary more among Black individuals.

Pages: 6 pages
Date: 2024-01
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