People also value the insurance protection against running out of money. Image: Sergey Nivens/Shutterstock.com
By: FEDweek StaffA posting by the Center for Retirement Research touts the value of Social Security as longevity insurance—protection against outliving one’s retirement assets—even though the program is commonly viewed in terms of the benefits payout compare with how much someone put in.
“Because Social Security provides a life annuity, it offers households protection against outliving their resources. The value of this protection increases with the unpredictability of their lifespan,” it says.
It says that is shown by comparing the expected “money’s worth” of Social Security—the value of benefits relative to the person’s lifetime contributions—against its “wealth equivalence”—the projected value of the lifetime benefits. The latter is substantially higher than the former across demographic factors including marital status, race and education, it says—in some cases more than twice as much.
“Comparing these two measures shows how neglecting longevity insurance underestimates the value of Social Security to various types of households,” it says.
“The message here is very important. Money’s worth alone does not fully reflect the value of Social Security. People also value the insurance protection against running out of money,” it adds.
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