By Scott Burns

OK, look that big gift horse in the mouth. How much are Social Security benefits really worth? Check your answer below.

1. Nada. I’m not getting them and don’t expect to get them, ever.
2. Not much, maybe $120,000 over my lifetime.
3. Quite a bit, but I don’t know how to measure the value.
4. I don’t answer public questions because I am a Social Security Millionaire.

If you answered “D” you’re probably right.

You can understand why by visiting a neat little PDF book, “Selected Interest Rates.” It is regularly updated and you can get it, free, by visiting the website of the Dallas Federal Reserve bank. Go through its 50 pages of dates and rates you can follow the rise of interest rates during the 70s and their slow fall through the 80s and 90s. Then you can weep at the absolute drought we are now experiencing.

As recently as 2,000, the yield on a 5-year Treasury obligation was 6.16 percent. Today the corresponding yield is 1.0 percent. Yields on Certificates of Deposit, which are not listed in the PDF, show a similar pattern.

So yields on safe investments are about one-sixth of what they were a decade ago. Put another way, today you need about six times as much in savings to provide the same income. The $10,000 that would earn $619 a year in 2000 now earns only $100 a year. Small wonder most retirees with savings are cutting back.

The yield drought also makes Social Security benefits massively more important… and more valuable. With the average Social Security benefit check at $1,181.60 a month as of August, or $14,179.20 a year, the average retiree would need (are you ready for this?) $1.4 million in a U.S. Treasury 5-year obligation to get the same income as he or she now gets from Social Security.

Compare that to the average monthly Social Security benefit in 2000, $840 or $10,080 a year. At 6.16 percent, you needed just $162,843 in savings to provide the same income as Social Security. That kind of gets your attention, doesn’t it?

Since workers in their 60s seldom have more than $200,000 in their 401(k) accounts, it’s pretty clear that Social Security income is wildly more important for most Americans than income from any form of personal savings. Social Security is the elephant in the room when it comes to retirement.

It also means that having Social Security income is a pretty good proxy for having the income of a millionaire in 2011. Of course, being a millionaire isn’t what it used to be.

Readers who like to do workouts on their financial calculators are likely to complain about these figures, so let me point out that there are more accurate ways to estimate the value of Social Security benefits. If you have $1.4 million in savings, for instance, it will still be paying interest after you die. But your Social Security benefits stop when you die, unless you have a spouse with lower benefits. (Your surviving spouse will receive survivor benefits, which will be very close to the larger of the two benefits.) Viewed this way, a new retiree at age 66 with a starting check of $1,181.60 a month would receive benefits worth about $241,046 over a 17-year life expectancy and the total value when the spousal survivor benefit is included would be about $354,480. It will be worth more for people who live a long time and less for people who don’t. That’s the value today, in current purchasing power.

Either way, it’s more than pocket change. It’s more than the value of the average house. It’s more than the vast majority of workers accumulate in their 401(k) s and IRAs. And it’s worth more than the typical pension is for the ever-diminishing number of workers fortunate enough to have them.

Why am I telling you this?

Two reasons. First, even if you’re very well off, Social Security is a big deal. Only the truly wealthy can say Social Security isn’t important to them. Second, for the rest of us— all us struggling brutes with less than $5 million or more— scheming to maximize Social Security benefits is the easiest way to improve retirement income.

Next week: The best ways to increase your Social Security benefits