Social Security: a present value analysis of Old Age Survivors Insurance (OASI) taxes and benefits
Duffy, Shawn P.
Henderson, David R.
Terasawa, Katsuaki L.
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This thesis presents a present value analysis of the Old-Age Survivors Insurance (OASI) comparing retirement benefits under Social Security with alternative private sector plans and provides a spreadsheet model for making this comparison of plans using different assumptions. The investigation was done by collecting data from various books, Government publications, and various Government agencies to conduct a spreadsheet analysis of three different wage-earning groups, assuming various real interest rates potentially earned in the private sector. A comparison of Social Security with alternative private sector plans is important to the DoD/DoN because less constrained budgets could result if Social Security is allowed to let individuals opt for private investment. The analysis presents clear findings showing that most people incur a net present value loss when comparing Social Security to the private sector if realistic real rates of return, on the order of four to seven percent, are used. Individuals only experience a net gain when an artificially low real rate of return of two percent, which is used by Social Security, is assumed.
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