Social Security is Worth $225k for the Average Retiree

Here's an interesting report on the value of Social Security:

The average monthly benefit for retirees is $1,045 in 2007. A 65-year old who wanted to buy a guaranteed income of that size – with payments that go up with the cost of living and continue for a widowed spouse -- would need to pay an insurance company about $225,000.

In other words, if you had to buy an annuity that paid you what Social Security pays, it would cost you $225k. So does this mean that someone who dies with $200k in net worth has a "real" net worth of $425k due to the value of Social Security?

Here are a couple other interesting facts:

• The value of the disability benefits for disabled workers – those who cannot work at any job for at least a year because of physical or mental illness and impairments – was the equivalent of purchasing a $414,000 disability insurance policy in 2006. That represents the total benefits available to a 30-year old worker who becomes disabled after earning between $25,000 and $30,000 a year, has a 28 year-old spouse, a child age two and an infant under the age of one.

• Social Security also provides life insurance protection to millions of workers. Benefits are paid to survivors of deceased workers and their dependents. The value of the life insurance protection is worth $433,000 for the young family described above.

Not sure if these represent "good deals" or not for any specific individual, but the information itself is rather interesting.

Comments

[Minimum Wage]

And it's probably a lousy deal for low income workers who have low marriage rates (what good are survivor benefits then?) and shorter lifespans.

[rwh]

There are a heck of a lot of people out there who would be in a terrible position without social security.

[Minimum Wage]

But they'd be in a much better position if they had been able to invest the same amount of money in a personal brokerage account.

The people who die early get squat from Social Security. There's a huge difference between being able to leave your adult children an inheritancxe and leaving them squat.

[rwh]

Minimum wage:

You're looking at the issue from a middle class perspective, or maybe upper middle class. There are a lot of people who don't and never will fall into that category.