Each method has advantages and disadvantages. We used a method based on average life expectancies, which involves calculating how long an average member of a particular group is expected to live, and then calculating the return from Social Security for a worker who lives to that life expectancy. Our critics mainly favor the expected value method, which involves adding up all of the expected benefits paid and taxes collected year by year. Unfortunately, this method is very susceptible to distortion by skewed data. Many actuaries, especially those in the private sector who advise clients on investment options for retirement, recognize the weaknesses of this method and routinely use the method we chose in analyzing investment options.
Some critics have their facts wrong.
In fact, we use a life expectancy of 73.81 years, which takes into account probable improvements in life expectancy that would increase the rate of return for these Americans. Even studies using different methods agree that, for African-American workers, Social Security offers a worse deal than it does for white workers with identical incomes and family structure. This is simply wrong. Both DI taxes and benefits are excluded from the Heritage analysis. Heritage also carefully accounts for pre-retirement Survivors' Insurance by excluding the taxes necessary to purchase this insurance.