2021 OASDI Trustees Report

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Short-Range Actuarial Estimates
For the short-range period (2021 through 2030), 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 (from the beginning of 2021 through the beginning of 2031) 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 85 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 66 percent at the beginning of 2021. The projected DI trust fund ratio declines to 62 percent at the beginning of 2022, and then increases to 86 percent by the beginning of 2031. On a combined basis, OASDI also fails the Trustees’ test of short-range financial adequacy because the OASDI trust fund ratio declines to 85 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.
For this report, combined reserves are projected to start declining in 2021 and to continue to decline throughout the remainder of the short-range period.
Long-Range Actuarial Estimates
The Trustees use three types of measures to assess the actuarial status of the program over the long-range period (2021 through 2095): (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.
The Trustees also apply a test of long-range close actuarial balance each year. To satisfy the test, a trust fund must meet two conditions: (1) the trust fund satisfies the test of short-range financial adequacy, and (2) the trust fund ratio stays above zero throughout the 75-year projection period, such that benefits would be payable in a timely manner throughout the period. The OASI, DI, and combined OASI and DI Trust Funds all fail the test of long-range close actuarial balance under the intermediate assumptions.
Annual Income Rates, Cost Rates, and Balances
Figure II.D2 illustrates the year-by-year relationship among OASDI income (excluding interest), cost (including scheduled benefits), and expenditures (including payable benefits) starting in 2000 and for the full 75-year projection period (2021 through 2095). The figure shows all values as percentages of taxable payroll. Under the intermediate assumptions, demographic factors by themselves cause the projected cost rate to rise rapidly for the next two decades, level off in about 2040 through 2055, rise temporarily between 2055 and 2078, and then decline somewhat by 2095. 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 2034. After trust fund reserve depletion, continuing income is sufficient to support expenditures at a level of 78 percent of program cost for the rest of 2034, declining to 74 percent for 2095. 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 2033 for OASI and in 2057 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 2.7 workers for every OASDI beneficiary in 2020. 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 slowed substantially between 2013 and 2019, with the recovery of the economy offsetting the demographic shift during that period. The demographic shift will continue to drive this ratio down over about the next 15 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 5.1 percent in 2021 to a peak of about 6.2 percent for 2077, and then decline to 5.9 percent by 2095. Social Security’s non-interest income is projected to rise from 4.5 percent of GDP in 2021 to a peak of about 4.8 percent by 2030. Thereafter, non-interest income as a percent of GDP declines gradually, to about 4.4 percent for 2095, because the Trustees expect the share of employee compensation provided as noncovered fringe benefits to increase gradually.
Trust Fund Ratios
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 (2021 through 2095) 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 116 in 2040, then decline until reserve depletion.
Projected year of trust fund reserve depletion
Summary Measures
The actuarial balance is a summary measure of the program’s financial status through the end of the 75-year valuation period. The actuarial balance measure includes the trust fund asset reserves at the beginning of the period, all cost and income during the valuation period, and the cost of reaching a target trust fund reserve of one year’s cost by the end of the period. Therefore, the actuarial balance is essentially the difference between the present values of income and cost from 1937 through the end of the valuation period. Actuarial balance is expressed as a percentage of the taxable payroll for the 75-year valuation period. A negative actuarial balance is called an actuarial deficit. The actuarial deficit represents the average amount of change in income or cost that is needed throughout the valuation period in order to achieve actuarial balance.
In this report, the actuarial deficit for the combined OASI and DI Trust Funds under the intermediate assumptions is 3.54 percent of taxable payroll. The actuarial deficit was 3.21 percent of payroll in the 2020 report. If the assumptions, methods, starting values, and the law had all remained unchanged from last year, the actuarial deficit would have increased to 3.27 percent of payroll solely due to advancing the valuation period by 1 year. The actuarial deficit is 1.2 percent of GDP in this year’s report, increased from 1.1 percent in last year’s report.
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 2020 to 2095. 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 2020. The combined trust fund reserves decline on a present value basis after 2020, but remain positive through 2033. However, after 2033 this cumulative amount becomes negative, which means that the combined OASI and DI Trust Funds have a net unfunded obligation through each year after 2033. Through the end of 2095, the combined funds have a present-value unfunded obligation of $19.8 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 $17.5 trillion due to the change in the valuation date.
This unfunded obligation represents 3.35 percent of taxable payroll (increased from 3.03 percent in last year’s report) and 1.2 percent of GDP (increased from 1.0 percent in last year’s report) over the 75-year valuation period. The unfunded obligation as a share of taxable payroll over the period (3.35 percent) and the actuarial deficit (3.54 percent) are similar measures, but differ because the actuarial deficit includes the cost of having an ending trust fund reserve equal to one year’s cost.
Figures II.D2, II.D4, and II.D5 show that the program’s financial condition is worsening at the end of the projection period. Negative annual balances and increasing 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.
Uncertainty of the Projections
Significant uncertainty surrounds the intermediate assumptions. The Trustees use several methods to help illustrate that uncertainty.
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 2034 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 2061, but the trust funds would have sufficient income by the end of 2092 to permit full payment of scheduled benefits thereafter and also to pay in arrears the temporary shortfalls between 2061 and 2092. 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 2041 with 95‑percent confidence. In last year’s report, this range was between 2031 and 2042.
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 has changed as the methodology for the stochastic simulations was further developed. As noted in appendix E, this year’s report contains improvements and refinements and has expanded the indicated range of uncertainty.
Changes From Last Year’s Report
The projected long-range OASDI actuarial deficit increased from 3.21 percent of taxable payroll for last year’s report to 3.54 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 3.27 percent. Changes in law, methods, starting values, and assumptions combined to increase the actuarial deficit by an additional 0.27 percent of taxable payroll. For a detailed description of the specific changes identified in table II.D2, see section IV.B.6.
Valuation period a

The change in the 75-year valuation period from last year’s report to this report means that the 75-year actuarial balance now includes the relatively large negative annual balance for 2095. This change in the valuation period results in a larger long-range actuarial deficit. The actuarial deficit includes the trust fund reserve at the beginning of the projection period.

Note: Components may not sum to totals because of rounding.
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 years from 2021 through 2090, and then higher for 2091 through 2095. The differences in annual balances fluctuate somewhat in the early 2020s during the recovery from the recession, are small in the late 2020s, generally grow until the late 2050s, and then decline thereafter and change sign in 2090. For this year’s report, the annual balance improves from 2021 to 2022, due to the assumed path of recovery from the COVID-19 pandemic and the ensuing recession, which were not reflected in last year’s report. The trends later in the projection are mainly due to the changes made this year to fertility methodology and assumptions. For the full 75-year projection period, the annual balances are lower, on average, by 0.23 percentage point.

Sustainable solvency for the financing of the program under a specified set of assumptions has been achieved when the projected trust fund ratio is positive throughout the 75-year projection period and is either stable or rising at the end of the period.

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