No. of Recommendations: 3
Social Security is like most other insurance schemes. Current revenue from premiums is used to pay current benefit claims. If revenue is greater than benefit claims, the excess revenue is moved to a fund to pay future benefit claims. When benefit claims exceed revenue, money is taken from the fund to pay current benefit claims.

I take exception to that. I used to be the computer guy that provided all the data to the actuaries so they could develop their pricing and reserving projections, and then collected those projections for reporting to management.

Insurance is required to hold money in reserve for the expected amounts to be paid out. It typically goes from IBNR reserves (Incurred But Not Reported) to Case reserves (reported, but not yet paid) to Case paid. In the end, everything moves Case paid. Some lines of insurance have longer tails than. Auto collision is usually short-tailed (all moved to paid with a year or so), while malpractice is often long-tailed (payments over many years, even a lifetime).

On the most basic level, the current reserve amounts are the present value of all expected payment streams (including earnings on the reserves while held). The premium charged should cover those amounts plus allow for a profit.

In no way could SS pay out the present value of all expected payments.
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