Social Security Benefits of Immigrants and U.S. Born

Immigrants realize higher Social Security benefits per year worked in the U.S. then U.S. born, even when earnings are identical in all years the immigrant has been in the U.S. The benefit formula favors those with low lifetime covered earnings, and the years prior to immigration are treated as years of zero earnings. If instead earnings were averaged only over years of residence in the U.S., and benefits were prorated based on the share of a 35 or 40 year base period spent in residence, immigrants would receive the same return on their social security taxes as U.S. born. For a sample from the Health and Retirement Study, a group born between 1931 and 1941, prorating reduces immigrants' social security benefits by 7 to 15 percent. For immigrants who entered in the 1980's, the reductions would be over 30 percent. Prorating would reduce the present value of benefit payments to immigrants born from 1932 to 1941 by 7.5 billion to 15 billion. Most immigrants will still pay slightly more in taxes than they will receive in benefits. Taxes received from immigrants who subsequently emigrate without collecting benefits tip the balance in favor of including immigrants.