2023 OASDI Trustees Report

II. OVERVIEW

A. HIGHLIGHTS

This section summarizes the report’s major findings.

Now, more than 3 years after the start of the COVID-19 pandemic, the acute stage of the pandemic appears to be over, but the Trustees expect there will be residual effects on the population and the economy for years to come. Since the assumptions for last year’s report were set, the Trustees have reassessed their expectations for the economy in light of recent developments, including updated data on inflation and output, and have revised down the levels of gross domestic product (GDP) and labor productivity by about 3 percent over the projection period. Assumptions for growth are largely unchanged after the first 10 years of the projection period. The intermediate (best estimate) assumptions for this report were set in December 2022. The Trustees will continue to monitor developments and modify the projections in later reports.

In 2022

At the end of 2022, the OASDI program was providing benefit payments¹ to about 66 million people: 51 million retired workers and dependents of retired workers, 6 million survivors of deceased workers, and 9 million disabled workers and dependents of disabled workers. During the year, an estimated 181 million people had earnings covered by Social Security and paid payroll taxes on those earnings. The total cost of the program in 2022 was $1,244 billion. Total income was $1,222 billion, which consisted of $1,155 billion in non-interest income and $66 billion in interest earnings. Asset reserves held in special issue U.S. Treasury securities declined from $2,852 billion at the beginning of the year to $2,830 billion at the end of the year.

Short-Range Results (2023-32)

Under the Trustees’ intermediate assumptions, Social Security’s total cost is projected to be higher than its total income in 2023 and all later years. Total cost began to be higher than total income in 2021. Social Security’s cost has exceeded its non-interest income since 2010.

To illustrate the actuarial status of the Social Security program as a whole, the operations of the OASI and DI Trust Funds are often shown on a combined basis as OASDI. However, by law, the two funds are separate entities and therefore the combined fund operations and reserves are hypothetical. The combined reserves are projected to decrease from $2,830 billion at the beginning of 2023 to $590 billion at the end of 2032, the last year of the short-range period.

The reserves of the combined OASI and DI Trust Funds along with projected program income are sufficient to cover projected program cost over the next 10 years under the intermediate assumptions. However, the ratio of reserves to annual cost is projected to decline from 204 percent at the beginning of 2023 to 96 percent at the beginning of 2029 and remain below 100 percent for the remainder of the 10-year short-range period. Because this ratio falls below 100 percent by the end of the 10th projection year, the combined OASI and DI Trust Funds fail the Trustees’ test of short-range financial adequacy. Considered separately, the OASI Trust Fund fails this test, but the DI Trust Fund satisfies the test. For last year’s report, the combined reserves were projected to be 211 percent of annual cost at the beginning of 2023 and 57 percent at the beginning of 2032.

Long-Range Results (2023-97)

Under the Trustees’ intermediate assumptions, OASDI cost is projected to exceed total income in 2023, and the dollar level of the hypothetical combined trust fund reserves declines until reserves become depleted in 2034, one year earlier than projected in last year’s report. Figure II.D2 shows the implications of reserve depletion for the combined OASI and DI Trust Funds. Considered separately, the OASI Trust Fund reserves become depleted in 2033, one year earlier than projected in last year’s report, and, as in last year’s report, the DI Trust Fund reserves do not become depleted within the 75-year long-range projection period.²

The DI program continued to have low levels of disability applications and benefit awards through 2022. Disability applications have declined substantially since 2010, and the total number of disabled-worker beneficiaries in current payment status has been falling since 2014. For this report, disability applications are assumed to rise gradually from current low levels, resulting in a rise in the age-sex-adjusted disability incidence rate to an ultimate rate of 4.8 per thousand exposed by the end of the short-range projection period.

OASDI cost has been generally increasing much more rapidly than non-interest income since 2008 and is projected to continue to do so through about 2040. In this period, the retirement of the baby-boom generation is increasing the number of beneficiaries much faster than the increase in the number of covered workers, as subsequent lower-birth-rate generations replace the baby-boom generation at working ages. Between about 2040 and 2055, OASDI cost and non-interest income are projected to generally increase at more similar rates as the cost rate (the ratio of program cost to taxable payroll) roughly stabilizes, reflecting the return to birth rates above 2 children per woman between 1990 and 2008. Between 2055 and 2078, OASDI cost is projected to grow significantly faster than income because of the period of historically low birth rates starting with the recession of 2007‑09. From 2078 to 2097, cost is projected to grow somewhat slower than income, as birth rates are assumed to return to a level of 2 children per woman for 2056 and thereafter.

Over the 75-year long-range period 2023-97, the projected OASDI annual cost rate increases from 14.53 percent of taxable payroll for 2023 to 18.50 percent for 2078, and then decreases generally to 17.75 percent for 2097. The projected cost rate for 2097 is 4.35 percent of taxable payroll more than the projected income rate (the ratio of non-interest income to taxable payroll) for 2097. For last year’s report, projected OASDI cost for 2097 was 17.65 percent, or 4.26 percent of payroll more than the annual income rate for that year. Expressed in relation to the projected gross domestic product (GDP), OASDI cost generally rises from 5.2 percent of GDP for 2023 to a peak of about 6.3 percent for 2076, and then declines to 6.0 percent by 2097.

The actuarial deficit is 3.61 percent of taxable payroll for the 75-year projection period through 2097, increased from 3.42 percent of taxable payroll for the 75-year projection period through 2096 in last year’s report. The closely-related open-group unfunded obligation for OASDI is 3.42 percent of taxable payroll over the 75-year projection period through 2097, increased from 3.24 percent of payroll over the 75-year projection period through 2096 in last year’s report. The open-group unfunded obligation for OASDI is $22.4 trillion in present value over the 75-year projection period through 2097 and is $2.0 trillion more than the measured level of $20.4 trillion over the 75-year projection period through 2096 in last year’s report. The actuarial deficit rounds to 1.3 percent and the unfunded obligation rounds to 1.2 percent of GDP over the 75-year projection period through 2097, compared to 1.2 percent for the actuarial deficit and 1.1 percent for the unfunded obligation over the 75-year projection period through 2096 in last year’s report.

If the assumptions, methods, starting values, and the law had all remained unchanged, the actuarial deficit would have increased to 3.48 percent of taxable payroll, and the unfunded obligation would have risen to 3.29 percent of taxable payroll and $21.2 trillion in present value due to the change in the valuation date and the extension of the valuation period through an additional year, 2097. The actuarial deficit increased significantly in this year’s report primarily due to recent economic experience and changes in near-term economic assumptions, as described in detail in section IV.B.6 of this report. In particular, the level of potential GDP is assumed to be about 0.9 percent lower than the level estimated in last year’s report for 2020, widening to about 3.0 percent lower by 2026 and for all years thereafter. This shift was made as the Trustees lowered the levels of GDP and total economy labor productivity in response to recent economic developments, including higher-than-expected inflation rates and lower-than-expected output growth.

To illustrate the magnitude of the 75-year actuarial deficit, consider that for the combined OASI and DI Trust Funds to remain fully solvent throughout the 75-year projection period ending in 2097: (1) revenue would have to increase by an amount equivalent to an immediate and permanent payroll tax rate increase of 3.44 percentage points³ to 15.84 percent beginning in January 2023; (2) scheduled benefits would have to be reduced by an amount equivalent to an immediate and permanent reduction of 21.3 percent applied to all current and future beneficiaries effective in January 2023, or 25.4 percent if the reductions were applied only to those who become initially eligible for benefits in 2023 or later; or (3) some combination of these approaches would have to be adopted.

If substantial actions are deferred for several years, the changes necessary to maintain Social Security solvency would be concentrated on fewer years and fewer generations. Significantly larger changes would be necessary if action is deferred until the combined trust fund reserves become depleted in 2034. For example, maintaining 75-year solvency through 2097 with changes that begin in 2034 would require: (1) an increase in revenue by an amount equivalent to a permanent 4.15 percentage point payroll tax rate increase to 16.55 percent starting in 2034, (2) a reduction in scheduled benefits by an amount equivalent to a permanent 25.2 percent reduction in all benefits starting in 2034, or (3) some combination of these approaches.

Conclusion

Under the intermediate assumptions, the projected hypothetical combined OASI and DI Trust Fund asset reserves become depleted and unable to pay scheduled benefits in full on a timely basis in 2034. At the time of depletion of these combined reserves, continuing income to the combined trust funds would be sufficient to pay 80 percent of scheduled benefits. The OASI Trust Fund reserves are projected to become depleted in 2033, at which time OASI income would be sufficient to pay 77 percent of OASI scheduled benefits. DI Trust Fund asset reserves are not projected to become depleted during the 75-year period ending in 2097.

Lawmakers have a broad continuum of policy options that would close or reduce Social Security's long-term financing shortfall. Estimates for many such policy options are available at ssa.gov/OACT/solvency/provisions/.

The Trustees recommend that lawmakers address the projected trust fund shortfalls in a timely way in order to phase in necessary changes gradually and give workers and beneficiaries time to adjust to them. Implementing changes sooner rather than later would allow more generations to share in the needed revenue increases or reductions in scheduled benefits. Social Security will play a critical role in the lives of 67 million beneficiaries and 180 million covered workers and their families during 2023. With informed discussion, creative thinking, and timely legislative action, Social Security can continue to protect future generations.

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1

The definitions of “benefit payments” and other terms appear in the Glossary.

2

If the OASI Trust Fund reserves were to become depleted in 2033 as is currently projected, the operations of the hypothetical combined OASI and DI Trust Funds would not reflect the aggregated operation of the OASI Trust Fund and the DI Trust Fund because part of the OASI benefits could not be paid without a change in the law. The values shown for the hypothetical combined trust funds assume the law will have been changed to permit the transfer of resources between funds as needed.

3

The 3.44 percentage point increase in the payroll tax rate required to achieve 75-year solvency through 2097 differs somewhat from the 3.61 percent actuarial deficit. This is primarily because the rate increase required to achieve 75-year solvency reflects a zero trust fund reserve at the end of the period in 2097, whereas the 3.61 percent actuarial deficit incorporates an ending trust fund reserve equal to one year’s cost. While such an increase in the payroll tax rate would cause some behavioral changes in earnings and ensuing changes in benefit levels, such changes are not included in these calculations because they are assumed to have roughly offsetting effects on OASDI actuarial status over the 75-year long-range period as a whole.