Social Security & Medicare Lifetime Benefits

How much will you pay in Social Security and Medicare taxes over your lifetime? And how much can you expect to get back in benefits? It depends on whether you’re married, when you retire, and how much you’ve earned over a lifetime.

I recently published with Caleb Quakenbush “Social Security and Medicare Taxes and Benefits Over a Lifetime: 2012 Update” which updates previous estimates of the lifetime value of Social Security and Medicare benefits and taxes for typical workers in different generations at various earning levels based on new estimates of the Social Security Actuary. The “lifetime value of taxes” is based upon the value of accumulated taxes, as if those taxes were put into an account that earned a 2 percent real rate of return (that is, 2 percent plus inflation). The “lifetime value of benefits” represents the amount needed in an account (also earning a 2 percent real interest rate) to pay for those benefits. Values assume a 2 percent real discount rate and all amounts are presented in constant 2012 dollars.

While no major changes in Social Security or Medicare law have occurred since the last update, these estimates reflect alternative assumptions provided by the Center for Medicare and Medicaid Services (CMS) actuaries that lawmakers will cancel a draconian scheduled cut in Medicare payment rates to physicians and other scheduled spending reductions. The result is significantly higher projected lifetime Medicare benefits than current law assumptions would indicate.

Below is a sample table from the brief, for a two-earner couple both earning Social Security’s average wage measure. This set of calculations assumes that workers retire at age 65.

Two-Earner Couple: Average   Wage ($44,600 each in 2012 dollars)
Year cohort turns 65 Annual Social Security  benefits Lifetime Social Security  benefits Lifetime Medicare benefits Total lifetime benefits Lifetime Social Security  taxes Lifetime Medicare taxes Total lifetime taxes
1960 19,000 264,000 41,000 305,000 36,000 0 36,000
1980 30,800 461,000 151,000 612,000 196,000 17,000 213,000
2010 35,800 579,000 387,000 966,000 600,000 122,000 722,000
2020 37,800 632,000 427,000 1,059,000 700,000 153,000 853,000
2030 41,200 703,000 664,000 1,367,000 808,000 180,000 988,000

More background information on these calculations can be found at: http://www.urban.org/socialsecurity/lifetimebenefits.cfm.


5 Comments on “Social Security & Medicare Lifetime Benefits”

  1. Francella Poston says:

    Gene, Good information. We need a national dialogue on Social Security. Thank you, fp

  2. wkj says:

    It would be interesting to see similar computations for one earner couples where the wage earner has high and/or maximum earnings.

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