How Should Households Value Social Security?

45 Pages Posted: 14 Feb 2015 Last revised: 2 Jul 2019

See all articles by Sylvain Catherine

Sylvain Catherine

University of Pennsylvania - Finance Department

Date Written: June 30, 2019


I use a life-cycle model to study the value of Social Security from the point of view of working households. I find that the certainty equivalent of Social Security represents only half the sum of future cash flows discounted at the risk-free rate. Unlike the latter, the certainty equivalent is negative for young households and remains as such until their mid thirties. Nationwide, the sum of certainty equivalents is 19.6 trillion dollars, which is 37% lower than the non risk-adjusted value of 31 trillion dollars.

Keywords: Household finance, Social Security, Public liabilities, Portfolio choices

JEL Classification: G11, G18, D91, H55, H06

Suggested Citation

Catherine, Sylvain, How Should Households Value Social Security? (June 30, 2019). HEC Paris Research Paper No. FIN-2015-1086. Available at SSRN: or

Sylvain Catherine (Contact Author)

University of Pennsylvania - Finance Department ( email )

The Wharton School
3620 Locust Walk
Philadelphia, PA 19104
United States

Register to save articles to
your library


Paper statistics

Abstract Views
PlumX Metrics