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

Social Security helps Black individuals and those with low educational attainment – and therefore low earnings – through its progressive benefit structure. On the other hand, the nature of Old-Age and Survivors Insurance (OASI) as a life annuity inherently increases expected lifetime benefits for individuals who tend to live longer. Regardless of how these factors balance out, though, looking solely at expected benefits does not provide a full picture of Social Security’s value. Specifically, it neglects the program’s longevity insurance value, which favors Black beneficiaries and those with less education because they typically face greater uncertainty over how long they will live.

This brief, based on a recent paper, assesses the value of OASI, including the program’s longevity insurance value, by race, gender, marital status, and education; and it estimates the extent to which incorporating longevity insurance enhances the equalizing effect of OASI.1

The discussion proceeds as follows. The first section explains why OASI’s value might differ by race and socioeconomic status (SES). The second section describes the data and methodology. The third section presents the results. The final section concludes that once the insurance value of OASI is considered, the program is significantly more valuable than the lifetime OASI payroll taxes paid for almost all household types; and OASI increases racial equity in retirement security more than is suggested by measures of expected benefits alone.