Social Security Annuities and Transfers: Distributional and Tax Implications

Abstract

The division of social security (OASI) benefits into an annuity portion and a transfer portion has been well documented. I have discussed this issue extensively in previous work (1987b; 1988; Greenwood and Wolff, 1990; and forthcoming), as did Burkhauser and Warlick (1981) previously. My methodology is quite similar to theirs. The annuity portion is defined as the benefit level the worker would receive on the basis of his (her) contributions into the social security system (OASI) if the system were actuarially fair. The calculation is based on the worker’s estimated earnings history and actual social security tax rates. The transfer portion is the difference between the actual social security benefit received and the actuarially fair annuity equivalent. As we shall see below, it has been uniformly positive for workers who have retired on or before 1983.KeywordsSocial SecurityGini CoefficientHousehold WealthSocial Security SystemSocial Security ContributionThese keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.