Introduction to Social Security

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Largest single category of Federal outlays.

For most Americans, Social Security tax is largest tax that they pay

Employer's payroll tax falls on workers

Social Security is not a Pension Plan

Types of Pension Plans

Lump Sum vs. Insured Annuity (explain insured annuity)

Defined Contribution vs. Defined Benefit

Risks of defined benefit plans: investment risk, actuarial risk; role of reserves

Social Security: insured annuity, defined benefit plan, without reserves. Transfer program from worker to retirees

Key ratio: number of workers per retiree

For Japan and Western Europe, crisis begins sooner and goes deeper.