Present value analysis suggests that the real rate of return on Social Security is
A)more than 10% for high income earners.
B)around 10% for workers of all income levels.
C)roughly 3% for low income earners and negative for high income earners.
D)roughly 3% for high income earners and negative for low income earners.

Question

Quizplus · Accepted Answer

Present value analysis suggests that Social Security provides a higher rate of return to low income earners than to high income earners. This is because Social Security is designed to provide a progressive benefit structure, where lower earners receive a higher percentage of their pre-retirement income in benefits than higher earners. Therefore, the real rate of return is roughly 3% for low income earners and may be negative for high income earners.

Present Value Analysis Suggests That the Real Rate of Return