Who Really Gets the Best Deal from Social Security?

            It received little attention at the time. Who, after all, cared about what some government actuaries researched in the weeks before the election?

            We were concerned about bigger things, like the future of democracy in America and other distractions.

            But now we know.

            Thanks to the Office of the Chief Actuary for Social Security, we know who really gets the best deal from Social Security—who gets their “money’s worth,” and then some.

            But before I open the envelope, a little background.

            The actuaries at Social Security have done “money’s worth” studies for a long time. They matched the standard U.S. life table with different household arrangements (single men, single women, married couples with two earners, married couples with one earner) and calculated how much each household arrangement received in benefits compared to how much they had paid in.

            “But, but, but!!!,” economists and sociologists would cry out, “That’s dumb. It’s firmly established that households with more education and income live longer and suffer less disability. Your figures are bogus!”

            Beyond teacup, this tempest.

            Here’s an example. A few decades ago, a typical black male could not expect to live long enough to claim Social Security benefits. Their life expectancy was less than 62 years. Today, black male life expectancy has improved. But it still trails white, Hispanic and Asian male life expectancy at birth.

            According to the most recent life expectancy tables the short straw is now held by American Indian and Alaska Native males. Their life expectancy at birth is only 62.2 years. Even Russian men do better (67.6 years), not to mention Myanmar (64.2 years), Ukraine (63.5 years), or even Ethiopia (62.6 years).

            With figures like that it isn’t a great leap to argue that disadvantaged groups in our society are subsidizing the benefits of the prosperous. (See table below.)

           Prior to the October actuarial note, these raw figures encouraged dramatic declarations.

            Not now. The October note matches life expectancy and, more important, disability levels, by differences in career earnings level. That means data-based measurements, not hyperbolic words.

            Their conclusion?

“The analysis presented in this note shows that the difference in lifespan by earnings level is roughly offset in most cases by the differences in disability incidence by earnings level, clarifying that the OASDI program as a whole provides higher money’s worth ratios for lower earners over their lifetime than for higher earners, as intended.”

            This should bring a bit of silence from the politics of grievance front.

            What it doesn’t do, of course, is alter the rude fact that some Americans suffer more disability and shorter lifespans through no fault of their own. The victims may have to tone down their rhetoric, but the prosperous need to stop blaming the victims.

            The prize for greatest money’s worth, however, isn’t determined by disability and life expectancy alone. It also changes with the structure of households. It turns out that single men do slightly worse than single women and two earner households are somewhere in between. They get a bit more than they paid in.

            But the “winner take all” prize goes to median income households with two people and one earner. They get 60 to 80 percent more for their money because they collect two Social Security benefits while having to pay employment taxes for only one worker.

            Call it the “Leave It to Beaver Prize,” in honor of Ward and June Cleaver, model parents in the proverbial “good old days” when one paycheck could support a family.

Related columns:

Scott Burns, “Get a Big Raise, Live Longer,” 8/19/2018: https://scottburns.com/get-a-big-raise-live-longer/

Scott Burns, “The Longevity of the Nerds, Continued,” 6/4/2022: https://scottburns.com/nerds-are-living-longer-witness-the-mit-class-of-1962/

Scott Burns, “The Longevity of the Nerds,” 1/24/2016: https://scottburns.com/longevity-of-the-nerds/

Scott Burns, “The Hedonic Clock,” 10/26/2014: https://scottburns.com/the-hedonic-clock/

Sources and References:

Karen Rose, Kyle Burkhalter, and Daniel Nickerson, “Money’s Worth Ratios Under the OASDI Program for Hypothetical Workers,” 10/2024: https://www.ssa.gov/oact/NOTES/ran7/an2024-7.pdf

Male life expectancy ranked by country on worlddata.info website:

https://www.worlddata.info/life-expectancy.php

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          This information is distributed for education purposes, and it is not to be construed as an offer, solicitation, recommendation, or endorsement of any particular security, product, or service.

Photo: Scott Burns, Repose on the Camino de Santiago, 2024

(c)  Scott Burns, 2024