Short-Range Actuarial EstimatesFor the short-range period (2020 through 2029), the Trustees measure financial adequacy using trust fund ratios, which compare projected asset reserves at the beginning of a year to projected program cost for the year. Maintaining a trust fund ratio of 100 percent or more — that is, reserves at the beginning of a year at least equal to projected cost for the year — is a good indication that the trust fund can cover most short-term contingencies. The Trustees' test of short-range financial adequacy is met if under the intermediate assumptions (1) the estimated trust fund ratio is at least 100 percent at the beginning of the period and remains at or above 100 percent throughout the 10-year short-range period or (2) the ratio is initially less than 100 percent, but reaches at least 100 percent within five years and remains at or above 100 percent throughout the remainder of the 10-year short-range period. The projected trust fund ratio under the intermediate assumptions for the OASI Trust Fund declines to 94 percent by the beginning of 2030. Therefore, OASI fails the Trustees’ test of short-range financial adequacy. The DI Trust Fund also fails the Trustees’ test of short-range financial adequacy. The Trustees estimate that the DI trust fund ratio was at 62 percent at the beginning of 2020. The projected DI trust fund ratio declines to 61 percent at the beginning of 2021, and then increases to 93 percent by the beginning of 2030. On a combined basis, OASDI also fails the Trustees’ test of short-range financial adequacy because the OASDI trust fund ratio declines to 94 percent by the beginning of 2030. Figure II.D1 shows that the trust fund ratio for the combined OASI and DI Trust Funds declines steadily after 2010.

Figure II.D1.—Short-Range OASI and DI Combined Trust Fund Ratio Long-Range Actuarial EstimatesThe Trustees use three types of measures to assess the actuarial status of the program over the long-range period (2020 through 2094): (1) annual cash-flow measures, including income rates, cost rates, and balances; (2) trust fund ratios; and (3) summary measures such as actuarial balances and open-group unfunded obligations. The Trustees express these measures as percentages of taxable payroll, as percentages of gross domestic product (GDP), or in dollars. The Trustees also present summary measures over the infinite horizon in appendix F. The infinite horizon values provide an additional indication of Social Security’s very-long-run financial condition.Figure II.D2 illustrates the year-by-year relationship among OASDI income (excluding interest), cost (including scheduled benefits), and expenditures (including payable benefits) for the full 75-year period (2020 through 2094). The figure shows all values as percentages of taxable payroll. Under the intermediate assumptions, demographic factors would by themselves cause the projected cost rate to rise rapidly for the next two decades before leveling off in about 2040. However, the economic recession of 2007-09 temporarily depressed taxable earnings and increased the number of beneficiaries, which in turn sharply, but temporarily, increased the cost rate starting in 2009. From a peak in 2013, the cost rate declined through 2017 under the economic recovery and thereafter returns to a gradually rising trend. The projected income rate is stable at about 13 percent throughout the 75-year period.Annual OASDI cost has exceeded non-interest income every year beginning with 2010. The Trustees project that cost will continue to exceed non-interest income throughout the 75-year valuation period. Beginning in 2021, cost is projected to exceed total income, and combined OASI and DI Trust Fund reserves diminish until they become depleted in 2035. After trust fund reserve depletion, continuing income is sufficient to support expenditures at a level of 79 percent of program cost for the rest of 2035, declining to 73 percent for 2094. Figure II.D2 depicts OASDI operations as a combined whole. However, under current law, the differences between scheduled and payable benefits would begin at different times for the program’s two trust funds: in 2034 for OASI and in 2065 for DI.

Figure II.D3 shows the estimated number of covered workers per OASDI beneficiary. Figures II.D2 and II.D3 illustrate the inverse relationship between cost rates and the number of workers per beneficiary. In particular, the projected future increase in the cost rate reflects a projected decline in the number of covered workers per beneficiary. There were about 2.8 workers for every OASDI beneficiary in 2019. This ratio had been stable, remaining between 3.2 and 3.4 from 1974 through 2008, and has declined since then, initially due to the economic recession of 2007-09 and the beginning of a notable demographic shift. This shift causes the ratio of workers to beneficiaries to decline, as workers of lower-birth-rate generations replace workers of the baby-boom generation. The decline in the ratio leveled off between 2013 and 2020, as the economy recovered, offsetting the demographic shift during that period. After 2020, the demographic shift will continue to drive this ratio down over the next 20 years. The ratio of workers to beneficiaries reaches 2.3 by 2035 when the baby-boom generation will have largely retired, and will generally decline very gradually thereafter due to increasing longevity.

Figure II.D3.—Number of Covered Workers Per OASDI Beneficiary Another important way to look at Social Security’s future financial status is to view its annual cost and non-interest income as a share of U.S. economic output (GDP). As shown in figure II.D4, Social Security’s cost as a percent of GDP is projected to grow from 5.0 percent in 2020 to about 5.9 percent by 2038, then decline to 5.8 percent by 2053, and generally increase thereafter to 5.9 percent for 2094. Social Security’s non-interest income is projected to rise from 4.6 percent of GDP in 2020 to 4.7 percent by 2029. Thereafter, non-interest income as a percent of GDP declines gradually, to about 4.4 percent for 2094, because the Trustees expect the share of employee compensation provided as noncovered fringe benefits to increase gradually.

The trust fund ratio is defined as the asset reserves at the beginning of a year expressed as a percentage of the cost during the year. The trust fund ratio thus represents the proportion of a year’s cost which could be paid solely with the reserves at the beginning of the year. Table II.D1 displays the projected maximum trust fund ratios during the long-range period for the OASI, DI, and combined OASI and DI funds. The table also shows the year of maximum projected trust fund ratio during the long-range projection period (2020 through 2094) and the year of trust fund asset reserve depletion. Trust fund ratios for OASI and combined OASI and DI are projected to decline from their current levels until reserve depletion. For DI, the trust fund ratio is projected to rise to 143 in 2041, then decline until reserve depletion.

Table II.D1.—Projected Maximum Trust Fund Ratios During the Long-Range Period

and Trust Fund Reserve Depletion Dates Projected year of trust fund reserve depletion Another way to illustrate the projected financial shortfall of the OASDI program is to examine the cumulative present value of scheduled income less cost. Figure II.D5 shows the present value of cumulative OASDI income less cost from the inception of the program through each of the years from 2019 to 2094. A positive value represents the present value of trust fund reserves at the end of the selected year. A negative value is the unfunded obligation through the selected year. The asset reserves of the combined trust funds were $2.9 trillion at the end of 2019. The combined trust fund reserves decline on a present value basis after 2019, but remain positive through 2034. However, after 2034 this cumulative amount becomes negative, which means that the combined OASI and DI Trust Funds have a net unfunded obligation through each year after 2034. Through the end of 2094, the combined funds have a present-value unfunded obligation of $16.8 trillion. If the assumptions, methods, starting values, and the law had all remained unchanged from last year, the unfunded obligation would have risen to about $14.5 trillion due to the change in the valuation date.Figures II.D2, II.D4, and II.D5 show that the program’s financial condition is worsening at the end of the projection period. Steadily worsening annual balances and cumulative values toward the end of the 75-year period provide an indication of the additional change that will be needed by that time in order to maintain solvency beyond 75 years. Consideration of summary measures alone for a 75‑year period can lead to incorrect perceptions and to policy prescriptions that do not achieve sustainable solvency.^{1}

Appendix F presents summary measures over the infinite horizon. The infinite horizon values provide an additional indication of Social Security’s financial condition for the period beginning with the inception of the program and extending indefinitely into the future, but results are subject to much greater uncertainty. Extending the horizon beyond 75 years increases the measured unfunded obligation. Through the infinite horizon, the unfunded obligation, or shortfall, is equivalent to 4.6 percent of future taxable payroll or 1.4 percent of future GDP.A first approach uses alternative scenarios reflecting low-cost (alternative I) and high-cost (alternative III) sets of assumptions. Figure II.D6 shows the projected trust fund ratios for the combined OASI and DI Trust Funds under the intermediate, low-cost, and high-cost assumptions. The figure indicates that the combined trust funds are projected to become depleted in 2035 under the intermediate alternative and in 2031 under the high-cost alternative. Under the low-cost alternative, trust fund reserves are projected to become depleted in 2079, but the trust funds would have sufficient income by the end of 2088 to permit full payment of scheduled benefits thereafter and also to pay in arrears the temporary shortfalls between 2079 and 2088. The low-cost alternative includes a higher ultimate total fertility rate, slower improvement in mortality, a higher real-wage differential, a higher ultimate real interest rate, a higher ultimate annual change in the CPI, and a lower unemployment rate. The high-cost alternative, in contrast, includes a lower ultimate total fertility rate, more rapid improvement in mortality, a lower real-wage differential, a lower ultimate real interest rate, a lower ultimate annual change in the CPI, and a higher unemployment rate. These alternatives are not intended to suggest that all parameters would be likely to differ from the intermediate values in the specified directions, but are intended to illustrate the effect of clearly defined scenarios that are, on balance, very favorable or unfavorable for the program’s financial status. Actual future costs are unlikely to be as extreme as those portrayed by the low-cost or high-cost projections. The method for constructing the low-cost and high-cost projections does not lend itself to estimating the probability that actual experience will lie within or outside the range they define.

Appendix D of this report presents long-range sensitivity analysis for the OASDI program. By varying one parameter at a time, sensitivity analysis provides a second approach for illustrating the uncertainty surrounding projections into the future.A third approach uses 5,000 independently generated stochastic simulations that reflect randomly assigned annual values for most of the key parameters. These simulations produce a distribution of projected outcomes and corresponding probabilities that future outcomes will fall within or outside a given range. The results of the stochastic simulations, discussed in more detail in appendix E, suggest that trust fund reserve depletion (the point at which reserves are insufficient to pay scheduled benefits in full and on time) is very likely before mid-century. In particular, figure II.D7 suggests that based on these stochastic simulations, trust fund reserves will become depleted between 2031 and 2042 with a 95‑percent confidence.The stochastic results suggest that trust fund ratios as high as the low-cost alternative are very unlikely. However, the relationship between the stochastic results and the low-cost and high-cost alternatives may change as the methodology for the stochastic simulations is further developed. As noted in appendix E, future improvements and refinements are expected to be more likely to expand than to reduce the indicated range of uncertainty.

The projected long-range OASDI actuarial deficit increased from 2.78 percent of taxable payroll for last year’s report to 3.21 percent of taxable payroll for this year’s report. The change in the 75-year projection period alone would have increased the actuarial deficit to 2.84 percent. Changes in law, methods, starting values, and assumptions combined to increase the actuarial deficit by an additional 0.38 percent of taxable payroll. For a detailed description of the specific changes identified in table II.D2, see section IV.B.6.

Figure II.D8 compares this year’s projections of annual balances (non-interest income minus cost) to those in last year’s report. The annual balances in this year’s report are lower (more negative) in all years beginning with 2022, principally due to the repeal of the ACA excise tax on high cost employer-sponsored group health insurance plans, which results in slower projected growth in average real covered earnings, and lower fertility rates. For the full 75-year projection period, the annual balances are lower, on average, by 0.37 percentage point.

Figure II.D8.—OASDI Annual Balances: 2019 and 2020 Trustees Reports

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