Fast Facts & Figures About Social Security, 2004

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Average Indexed Monthly Earnings
Disability Insurance
Full Retirement Age
Hospital Insurance
Old-Age, Survivors, and Disability Insurance
Old-Age and Survivors Insurance
Primary Insurance Amount
Social Security Administration
Supplemental Security Income

General Information, 2004

Cost-of-living adjustment

Cost-of-living adjustment, 2004: 2.1%

Tax rates

Tax rates, 2004 (in percent)
Program Employer and
employee, each
Total 7.65 15.30
OASI 5.30 10.60
DI 0.90 1.80
HI 1.45 2.90

Average wage index

Average wage index, 2002–2004 (in dollars)
Year Index
2002 33,252.09
2003 (estimated) 33,892.68
2004 (estimated) 35,057.39
SOURCE: 2004 Trustees Report.

Maximum earnings subject to Social Security taxes

Maximum earnings subject to Social Security taxes, 2004 (in dollars)
Program Amount
OASDI 87,900
HI No limit

Taxes payable

Taxes payable, 2004 (in dollars)
Type of earner OASI DI HI
Average earner 1,858 316 508
Maximum earner 4,659 791 No limit
Self-employed maximum earner 9,317 1,582 No limit

Quarters of coverage

Quarters of coverage, 2004 (work credits):
  • $900 in earnings equals 1 quarter of coverage (that is, 1 credit)
  • $3,600 is the maximum earnings needed for 4 quarters of coverage (4 credits) in a given year

Retirement earnings test

Retirement earnings test, 2004 (in dollars)
Period Annually Monthly
Ages 62–64 ($1 for $2 withholding rate) 11,640 970
Calendar year attaining retirement age ($1 for $3 withholding rate) a 31,080 2,590
After calendar year attaining retirement age or older No limit No limit
a. Test no longer applies beginning in the month in which retirement age is reached.

Age for full retirement benefit

Age for full retirement benefit
Applicable to workers who
were born in year—
Full benefit at age—
1938 65 and 2 months
1939 65 and 4 months
1940 65 and 6 months
1941 65 and 8 months
1942 65 and 10 months
1943–1954 66
1955 66 and 2 months
1956 66 and 4 months
1957 66 and 6 months
1958 66 and 8 months
1959 66 and 10 months
1960 and later 67

Benefit formula bend points

Benefit formula bend points (for workers who in 2004 attain age 62, become disabled, or die before age 62)

Primary insurance amount equals:
   90% of the first $612 of AIME, plus
   32% of AIME over $612 through $3,689, plus
   15% of AIME over $3,689

Maximum family benefit equals:
   150% of the first $782 of PIA, plus
   272% of PIA over $782 through $1,129, plus
   134% of PIA over $1,129 through $1,472, plus
   175% of PIA over $1,472

Disability thresholds

Disability thresholds, 2004

Substantial gainful activity:
   $810 per month for nonblind persons
   $1,350 per month for blind persons

Trial work period:
   $580 per month

Maximum Social Security benefit

Maximum Social Security benefit for worker retiring at full retirement age (65 and 4 months) in 2004: $1,825 per month.

Trust fund operations

Trust fund operations, 2003–2004 (in billions of dollars)
Calendar year Income Outgo Fund
at end
of year
2003 (actual)
OASI 543.8 406.0 1,355.3
DI 88.1 73.1 175.4
2004 (estimated)
OASI 562.7 421.5 1,496.6
DI 90.9 78.8 187.6
SOURCE: 2004 Trustees Report.

OASDI administrative expenses

OASDI administrative expenses (from the 2004 Trustees Report): Costs were 0.9% of contributions in calendar year 2003.

Benefit payments

Benefit payments as a percentage of gross domestic product, 2002–2003
Calendar year Total OASI DI
2002 4.33 3.70 0.63
2003 4.29 3.64 0.65


Workload, fiscal year 2003 (in millions)
Type of filing Number
OASI claims 3.2
DI claims 2.2
SSI applications 2.1

Supplemental Security Income

Supplemental Security Income, 2004

Federal payment standard:
   $564 individual, $846 couple

Resource limits:
   $2,000 individual, $3,000 couple

Poverty thresholds

Poverty thresholds, 2001–2003 (in dollars)
Family unit 2001 2002 2003
Aged individual 8,494 8,628 8,825
Family of two, aged head 10,715 10,885 11,122
Family of four 18,104 18,392 18,979
SOURCE: U.S. Census Bureau.

Income of the Aged Population

Size of Income, 1962 and 2002

Median annual income for married couples and nonmarried persons (aged 65 or older) has increased markedly since 1962 (the earliest year for which data are available). Even after adjusting for inflation, median income has risen 90% for married couples and 96% for nonmarried persons.

Median income of the aged, by marital status (in 2002 dollars)
Bar chart. Median income has risen for married couples from $17,126 in 1962 to $32,460 in 2002. Likewise, it has risen for nonmarried persons from $6,731 in 1962 to $13,190 in 2002.

Receipt of Income, 1962 and 2002

Social Security benefits—the most common source of income in 1962—are now almost universal. The proportion of the aged population with asset income—the next most common source—is similar to that in 1962. Over the 40-year period, receipt of private pensions has tripled, and receipt of government pensions has increased by over 50%. The proportion of couples and nonmarried persons aged 65 or older who received earnings was smaller in 2002 than in 1962.

Percentage of the aged receiving income, by source
Bar chart linked to data in table format.

Shares of Aggregate Income, 1962 and 2002

In 1962, Social Security, private and government employee pensions, income from assets, and earnings made up only 84% of the total income of the aged, compared with 97% in 2002. Although private pensions still accounted for only a small proportion of total income in 2002, they more than tripled their share over this period—from 3% to 10%. The share from earnings declined from 28% to 25%.

Aggregate income, by source, 2002
Pie chart showing the proportion of total income of the aged from six different income sources. The largest share is from Social Security at 39% followed by earnings at 25%. Asset income accounts for 14% of total income, private pensions make up 10%, and government employee pensions 9%.  Finally, 3% of total income is received from other sources.

Reliance on Social Security, 2002

In 2002, 90% of married couples and nonmarried persons (aged 65 or older) received Social Security benefits. Social Security was the major source of income (providing at least 50% of total income) for 66% of aged beneficiaries, and it was the only source of income for 22%.

Percentage of the aged receiving Social Security benefits, by relative importance of benefits to total income
Bar chart described in the text. In addition, 34% of aged beneficiaries received 90% or more of their income from Social Security.

Poverty Status Based on Family Income, 2002

The aged poor are those with income below the poverty line. The near poor have income between the poverty line and 125% of the poverty line. Nonmarried women and minorities have the highest poverty rates, ranging from 18% to 24%. Married persons have the lowest poverty rates, with 5% poor and 3% near poor. Overall, 10% are poor and 7% near poor.

Poverty status, by marital status, sex of nonmarried persons, race, and Hispanic origin
Bar chart linked to data in table format.
a. Beginning with data for 2002, respondents for the Current Population Survey may identify themselves in more than one racial group. The "White alone" and "Black alone" categories reflect respondents who reported only one race.

OASDI Program

Covered Earnings, 1937–2003

People contribute to Social Security through payroll taxes or self-employment taxes (FICA and SECA), as required by the Federal Insurance Contributions Act. The maximum taxable amount is updated annually based on increases in the average wage. Of the 154 million workers with Social Security taxable earnings in 2003, 5% had earnings that equaled or exceeded the maximum amount subject to taxes, compared with 3% when the program began and a peak of 36% in 1965. About 86% of earnings in covered employment were taxable in 2003, compared with 92% in 1937.

Percentage of earnings in covered employment and percentage of workers with maximum taxable earnings, selected years
Line chart. In 1937, 92% of earnings were in covered employment. That percentage fell gradually, reaching a low of 71.3% in 1965. It then rose steadily, peaking at 88.9% in 1985, then fell back slowly to about 86% in 2003. The percentage of workers with maximum earnings shows an inverse pattern. Only 3.1% of workers had maximum earnings in 1937, rising steadily and reaching a high of 36.1% in 1965. The percentage fell to 13% in 1975, then to 5.8% in 1985, and finally 5% in 2003.

Insured Status, 1970–2004

The percentage of persons aged 20 or older who are insured for benefits has steadily increased over time. The percentage permanently insured (with enough covered work experience to qualify for retired-worker benefits at retirement age) rose from 50% in 1970 to 69% in 2004. The percentage fully insured increased from 77% to 87% in 2004. To be fully insured, a worker must have at least one quarter of coverage for each year elapsed after age 21 (but no earlier than 1950) and before the year in which he or she attains age 62 or becomes disabled. To be currently insured for disability at age 20 to full retirement age (FRA), the worker must be fully insured and have at least 20 quarters of coverage during the last 40 quarters. (Requirements for currently insured status are somewhat different for persons younger than age 31.)

Insured workers as a percentage of the corresponding population, selected years
Year Population aged 20 or older Population aged 20–FRA
Millions Percentage
Millions Percentage
insured for
1970 135.2 50 77 113.2 62
1975 147.5 50 80 122.9 65
1980 162.0 53 83 133.3 70
1985 175.1 57 84 144.1 73
1990 186.0 63 86 151.9 76
1995 194.7 66 87 160.5 78
2000 204.7 69 88 169.2 79
2003 216.3 68 87 179.7 78
2004 216.9 69 87 180.3 79
SOURCE: Social Security Administration, Office of the Chief Actuary.
NOTE: The population in the Social Security area includes residents of the 50 states and the District of Columbia, residents of outlying areas, federal civilian employees and armed forces abroad and their dependents, crew members of merchant vessels, and certain other U.S. citizens residing abroad.

Insured Status, by Sex, 1970 and 2004

Although men are more likely than women to be insured, the gender gap is shrinking. The proportion of men who are insured has remained essentially stable, with 92% fully insured and 84% insured for disability. By contrast, the proportion of women who are insured has increased dramatically—from 63% to 82% fully insured and from 41% to 73% insured for disability.

Percentage of population fully insured and insured for disability benefits, by sex
Bar chart linked to data in table format.
SOURCE: Social Security Administration, Office of the Chief Actuary.

New Benefit Awards, 2003

Benefits were awarded to 4.3 million persons: of those, 41% were retired workers and 18% were disabled workers. The remaining 41% were spouses, children, survivors, or dependents of workers who received benefits based on the worker's earnings record. These awards represent not only new entrants to the benefit rolls but also persons already on the rolls who become entitled to a different benefit, particularly conversions of disabled-worker benefits to retired-worker benefits at age 65 and 2 months.

New awards, by type of beneficiary
Beneficiary Number
Total 4,322 100
Retired workers and dependents 2,209 51
Workers 1,791 41
Spouses and children 418 10
Disabled workers and dependents 1,260 29
Workers 777 18
Spouses and children 482 11
Survivors of deceased workers 853 20
New awards, 2003
Bar chart described in the text.

New Awards to Workers, 1960–2003

Awards to retired workers have increased considerably since 1960 but proportionately much less than awards to disabled workers. The patterns of growth have also differed. The number of awards to retired workers climbed steadily—from 1 million in 1960 to 1.7 million in 1985. Over the next 10 years, it tapered off slightly, rose to almost 2 million in 2000, then declined to 1.8 million in 2003. Disabled-worker awards increased gradually—from 208,000 in 1960 to 592,000 in the mid-1970s—before falling to 377,000 in 1985. The number then rose, reaching 777,000 in 2003.

New awards to retired and disabled workers, selected years
Line chart linked to data in table format.

Beneficiaries in Current-Payment Status, December 2003

About 47 million beneficiaries were in current-payment status, that is, they were being paid a benefit. The majority of those beneficiaries (63%) were retired workers, and 12% were disabled workers. The remaining 25% were spouses, children, survivors, or dependents of retired or disabled workers.

Beneficiaries in current-payment status
Beneficiary Number
Total 47,038 100
Retired workers and dependents 32,633 69
Workers 29,532 63
Spouses and children 3,102 7
Disabled workers and dependents 7,595 16
Workers 5,874 12
Spouses and children 1,722 4
Survivors of deceased workers 6,810 14
Beneficiaries, by type
Pie chart illustrating the Percent data from the previous table. In addition, showing that about 10% of beneficiaries in current-payment status were spouses and children of retired and disabled workers.
NOTE: Percentages may not sum to 100 because of rounding.

Average Benefit Amounts, 2003

Benefits payable to workers who retire at the full retirement age and to disabled workers are equal to 100% of the PIA (subject to any applicable deductions). At the full retirement age, widows' benefits are also payable at 100% of the insured worker's PIA. Nondisabled widow(er)s can receive reduced benefits at age 60. Disabled widow(er)s can receive benefits at age 50. Spouses, children, and parents receive a smaller proportion of the worker's PIA than widow(er)s do.

Average monthly benefit for new awards and for benefits in current-payment status (in dollars)
Beneficiary New awards Current-payment
Total 761 841
Retired workers 941 922
Spouses 352 463
Children 429 444
Disabled workers 936 862
Spouses 238 221
Children 246 254
Nondisabled widow(er)s 762 888
Disabled widow(er)s 578 564
Widowed mothers and fathers 672 664
Surviving children 624 603
Parents 779 779

Hypothetical Benefit Amounts, 2004

A covered worker who had worked continuously at low wages (45% of the national average wage) and who claimed benefits at age 62 and 1 month in January 2003 would receive a monthly benefit of $575. One who had earnings at or above the maximum amount subject to Social Security taxes and who claimed benefits at age 65 would receive $1,784. Someone who claimed benefits at age 70, which maximizes the effect of the delayed retirement credit, would receive $2,111.

Hypothetical benefit (in dollars)
Earnings Age 62 a Age 65 b Age 70 c
Low 575 721 852
Average 947 1,190 1,420
High 1,245 1,559 1,831
Maximum 1,422 1,784 2,111
SOURCE: Social Security Administration, Office of the Chief Actuary.
NOTE: Low earnings are defined as 45% of the national average index, average earnings are equal to the index, high earnings are 160% of the index, and maximum earnings are equal to the OASDI contribution and benefits base.
a. Retirement at age 62 is assumed here to be at exact age 62 and 1 month. Such early retirement results in a reduced monthly amount.
b. Retirement at age 65 is assumed to be at exact age 65 and 0 months. For retirement in 2003 and later, the monthly benefit is reduced for early retirement. (For people born before 1938, age 65 is the full retirement age. The full retirement age will gradually increase to age 67.)
c. Retirement at age 70 maximizes the effect of delayed retirement credits.

Beneficiaries, by Age, December 2003

Of all OASI beneficiaries with benefits in current-payment status, 93% were aged 62 or older. Among DI beneficiaries (disabled workers and their spouses and children), 88% were under age 62.

Beneficiaries, by age
Two pie charts linked to data in table format.
NOTE: Percentages may not sum to 100 because of rounding.

Disabled-Worker Beneficiaries, by Age, 1960–2003

The average age of disabled-worker beneficiaries in current-payment status has declined substantially since 1960, when DI benefits first became available to persons younger than age 50. In that year, the average age of a disabled worker was 57.2 years. The rapid drop in average age in the following years reflects a growing number of awards to workers under 50. By 1995, the average age had fallen to a low of 49.8, and by 2003, it had risen slightly, to 51.3.

Average age of disabled workers, selected years
Line chart linked to data in table format.

Beneficiaries, by Sex, December 2003

Of all adults receiving monthly Social Security benefits, 43% were men and 57% were women. Eighty percent of the men and 57% of the women received retired-worker benefits. About one-fifth of the women received survivors benefits.

Adult beneficiaries, by type of beneficiary and sex
Two pie charts linked to data in table format.
NOTE: Percentages may not sum to 100 because of rounding.

Average Monthly Benefit, by Sex, December 2003

Among retired and disabled workers who collected benefits based on their own work records, men received a higher average monthly benefit than did women. For those with benefits based on another person's work record (spouses and survivors), women had higher average benefits.

Average benefit (in dollars)
Beneficiary Men Women
Total 1,013 764
Retired workers 1,039 798
Spouses 263 466
Disabled workers 966 735
Spouses 177 223
Nondisabled widow(er)s 698 890
Disabled widow(er)s 401 569
Mothers and fathers 570 669

Women Beneficiaries, 1940–2003

The proportion of women among retired-worker beneficiaries has quadrupled since 1960. The percentage climbed steadily from 12% in 1940 to 47% in 1980, leveling off at 48% in 1990. The proportion of women among disabled-worker beneficiaries has more than doubled since 1957, when DI benefits first became payable. The percentage rose steadily from 20% in 1957 to 35% in 1990 and 45% in 2003.

Women beneficiaries as a percentage of retired workers and disabled workers, selected years
Line chart linked to data in table format.

Women with Dual Entitlement, 1960–2003

The proportion of women aged 62 or older who are receiving benefits as dependents (that is, on the basis of their husband's earnings record only) has been declining—from 57% in 1960 to 32% in 2003. At the same time, the proportion of women with dual entitlement (that is, paid on the basis of both their own earnings record and that of their husbands) has been increasing—from 5% in 1960 to 28% in 2003.

Women aged 62 or older, by basis of entitlement, selected years
Area chart described in the text. In addition, the percentage of women who are entitled solely on their own earnings records as retired or disabled workers has remained fairly steady over this period at about 38%.

SSI Program

Beneficiaries, 1974–2003

Shortly after the SSI program began in 1974, the number of persons receiving federally administered SSI payments rose to 4 million. It remained at about that level until the mid-1980s, then rose through the mid-1990s. In 2003, it stood at just over 6.9 million.

Persons receiving federally administered SSI payments, selected years
Line chart described in the text. In addition, the number of recipients for 1974 was 3.2 million.

Payment Amounts, by Age, December 2003

The average federally administered SSI payment was $417. Payments varied by age group, ranging from an average of $491 for beneficiaries under 18 to $344 for those 65 or older.

Average monthly payment for federally administered SSI payments
Bar chart described in the text. In addition, beneficiaries aged 18-64 received an average payment of $436.
NOTE: Amounts exclude retroactive payments.

Federally Administered Payments, December 2003

Over 6.9 million persons received federally administered SSI payments. The majority received federal SSI only. States have the option of supplementing the federal benefit rate and are required to do so if that rate is less than the income the beneficiary would have had under the former state program.

Type of SSI payment
Pie chart. In December 2003, 64% of the over 6.9 million SSI beneficiaries received only a federal SSI payment, 32% received federally administered state supplementation along with their federal SSI payment, and 4% received only federally administered state supplementation.
a. Excludes state-administered state supplementation.

Basis for Eligibility and Age of Beneficiaries, December 2003

Eighteen percent of SSI beneficiaries received benefits on the basis of age, the rest on the basis of disability. Twenty-nine percent of the beneficiaries were aged 65 or older. In the SSI program—unlike the OASDI program—a disabled beneficiary is still classified as "disabled" after reaching age 65. DI beneficiaries are converted to the retirement program when they attain age 65.

Distribution of SSI beneficiaries, by basis for eligibility and age
Two pie charts. The first pie chart shows the percentage distribution in December 2003 of SSI beneficiaries by basis for eligibility: 81% are disabled, 18% are aged, and 1% are blind. The second pie chart shows the same group distributed by age: 14% are under 18, 57% are aged 18-64, and 29% are 65 or older.

Beneficiaries Aged 65 or Older, 1974–2003

The proportion of SSI beneficiaries aged 65 or older has declined from 61% in January 1974 to 29% in December 2003. The overall long-term growth of the SSI program has occurred because of an increase in the number of disabled beneficiaries, most of whom are under age 65.

Percentage of SSI beneficiaries aged 65 or older, selected years
Line chart described in the text.

Beneficiaries, by Sex and Age, December 2003

Overall, 58% of the 6.9 million SSI beneficiaries were women, but that percentage varied greatly by age group. Women accounted for 70% of the 2 million beneficiaries aged 65 or older, 57% of the 4 million beneficiaries aged 18–64, and 35% of the 1 million beneficiaries under age 18.

SSI beneficiaries, by sex and age
Bar chart linked to data in table format

Other Income, December 2003

Fifty-seven percent of SSI beneficiaries aged 65 or older received OASDI benefits, as did about 31% of those aged 18–64 and 7% of those under age 18. Other types of unearned income, such as veterans' pensions or income from assets, were reported most frequently among those under age 18 (19%) and those aged 65 or older (15%). Earned income was most prevalent (6%) among those aged 18–64.

Other income of SSI beneficiaries, by source and age
Bar chart linked to data in table format.

OASDI, SSI, or Both

All Beneficiaries, December 2003

About 51.5 million people received a payment from Social Security. Most (44.6 million) received OASDI benefits only, about 4.5 million received SSI only, and 2.4 million received payments from both programs.

All beneficiaries receiving OASDI, SSI, or both
Beneficiaries receiving
OASDI, SSI, or both
All beneficiaries 51,519
Total receiving
OASDI 47,038
OASDI only 44,617
SSI 6,902
SSI only 4,481
Both OASDI and SSI 2,421
NOTE: SSI includes federal SSI payments and federally administered state supplementation.
Number receiving benefits (in millions)
Bar chart described in the text.

Aged Beneficiaries, 65 or Older, December 2003

Aged or survivors benefits were paid to 34.2 million people aged 65 or older. About 1.1 million received both OASI and SSI.

Aged beneficiaries, 65 or older, receiving OASI, SSI, or both
Beneficiary Number
Aged 65 or older, total (unduplicated) 34,239
OASI, total a 33,391
Retired workers 26,943
Spouses b 2,332
Nondisabled widow(er)s 4,048
Disabled adult children aged 65 or older 67
SSI, total c 1,990
Receiving SSI only 848
Concurrently receiving both OASI and SSI 1,142
NOTE: SSI includes federal SSI payments and federally administered state supplementation.
a. Includes 2,900 persons who received dependent parents benefits, special age-72 benefits, or mother's and father's benefits.
b. Includes 23,900 spouses of disabled workers aged 65 or older.
c. Includes 756,900 disabled or blind SSI beneficiaries aged 65 or older.

Disabled Beneficiaries Aged 18–64, December 2003

Payments based on the beneficiary's own disability were made to 9.5 million people aged 18–64. Fifty-eight percent received disability payments under the OASDI program only, 29% received payments from the SSI program only, and 13% received payments from both programs.

Disabled beneficiaries aged 18–64 receiving OASDI, SSI, or both
Payments Number
Total 9,466
OASDI disability 6,725
Workers 5,830
Children aged 18–64 686
widow(er)s 209
OASDI disability only 5,513
SSI disability 3,953 a
SSI disability only 2,741
Both OASDI disability and SSI 1,212
NOTE: SSI includes federal SSI payments and federally administered state supplementation.
a. Excludes 757,900 disabled or blind SSI beneficiaries aged 65 or older.
Number receiving disability payments (in millions)
Bar chart described in the text.

Children and Social Security

OASDI Beneficiaries, December 2003

Over 3 million children under age 18 and students aged 18–19 received OASDI benefits. Children of deceased workers had the highest average payments, in part because they are eligible to receive monthly benefits equal to 75% of the worker's PIA, compared with 50% for children of retired or disabled workers. Overall, the average monthly benefit amount for children was $417.

Children receiving OASDI
Number of children of—
Bar chart linked to data in table format.
Average monthly benefit for children of—
Bar chart linked to data in table format.

SSI Beneficiaries, 1974–2003

In 1974, when the program began, there were 70,900 blind and disabled children receiving SSI. That number increased to 955,000 in 1996, declined to 847,000 in 2000, and is now 959,400. The relatively high average payment to children (compared with payments made to blind and disabled adults) is due in part to a limited amount of other countable income. The spike in average monthly benefits in 1992 is due to retroactive payments resulting from the Sullivan v. Zebley decision.

Children receiving SSI
Number of children under age 18 receiving SSI, selected years
Line chart linked to data in table format.
Average monthly SSI payments to children, selected years
Line chart linked to data in table format.
NOTE: As of 1998, these figures exclude retroactive payments.

Social Security Financing

How Social Security Is Financed

Social Security is largely a pay-as-you-go program. Most of the payroll taxes collected from today's workers are used to pay benefits to today's recipients. In 2003, the Old-Age and Survivors Insurance and Disability Insurance Trust Funds collected $632 billion in revenues. Of that amount, 84% was derived from payroll taxes and 2% from income taxes on Social Security benefits. Interest earned on the government bonds held by the trust funds provided the remaining 13% of income. Assets increased in 2003 because income exceeded expenditures for benefit payments and administrative expenses.

Source and uses of Social Security revenues in 2003
Two pie charts showing the sources and uses of the $632 billion in revenue collected by the Social Security trust funds in 2003. The Sources of Revenues pie has three slices. Payroll taxes: 84%. Interest: 13%. Taxation of benefits: 2%. The Uses of Revenues pie has three slices. Benefit payments: 75%. Increase in trust funds: 24%. Administrative expenses: 1%.
SOURCE: The 2004 Annual Report of the Board of Trustees of the Federal Old-Age and Survivors Insurance and Disability Insurance Trust Funds.

Social Security's Demographic Challenge

The number of retired workers is projected to grow rapidly starting in 2008, when the members of the post–World War II baby boom begin to reach early retirement age, and will double in less than 30 years. People are also living longer, and the birth rate is low. As a result, the ratio of workers paying Social Security taxes to people collecting benefits will fall from 3.3 to 1 today to 2.1 to 1 by 2031. At that ratio there will not be enough workers to pay scheduled benefits at current tax rates.

Ratio of covered workers to Social Security beneficiaries
Line chart. In 1955, there were 8.6 workers supporting each retiree. By 1975, that ratio had declined to 3.2 workers per beneficiary and remains between 3.2 and 3.4 over the next 30 years. Current projections have the ratio starting to decline again in 2008, decreasing at an accelerating rate until it reaches 2.1 workers per beneficiary in 2031. Thereafter, it continues to decline by one-tenth of a percentage point approximately every 15 years, arriving in 2080 at only 1.8 workers per beneficiary.
SOURCE: The 2004 Annual Report of the Board of Trustees of the Federal Old-Age and Survivors Insurance and Disability Insurance Trust Funds.

The Long-Run Financial Outlook

Social Security is not sustainable over the long term at present benefit and tax rates. Within 14 years the program will begin paying more in benefits than it collects in taxes. By 2042 the trust funds will be exhausted. At that point, payroll taxes and other income will flow into the fund but will be sufficient to pay only 73% of program costs. One way to illustrate the financial shortfall of the Social Security system is to examine the cumulative value of taxes less costs, assuming currently scheduled benefits and tax rates. In present-value terms, the shortfall over the next 75 years is $3.7 trillion, which is roughly equal to the total U.S. government debt held by the public today.

Cumulative income less cost based on present taxes and scheduled benefits
Line chart. The present value of the Social Security trust fund was over 1.5 trillion dollars at the end of 2003. That value steadily increases to 2.3 trillion dollars in 2017 before turning downward. By 2042, the trust fund will be exhausted (that is, a present value of 0). To continue to maintain scheduled benefits payments through 2077 would require a cash infusion into the trust fund with a present value of 3.5 trillion dollars.
SOURCE: The 2004 Annual Report of the Board of Trustees of the Federal Old-Age and Survivors Insurance and Disability Insurance Trust Funds.

The Cost of Delay

Each year, Social Security's trustees provide an estimate of the financial status of the program for the next 75 years. In changing from the valuation period of one year's Trustees Report to the next, an additional year with a large imbalance between taxes and benefits is added to the projection. As a result, the estimated cost of meeting Social Security's financial shortfall tends to go up every year.

Social Security's unfunded obligation on January 1 of each year
Bar chart. Social Security's unfunded obligation has risen from an estimated 2.9 trillion dollars in 1999 and 2000 to 3.2 trillion dollars in 2001, 3.3 trillion dollars in 2002, 3.5 trillion dollars in 2003, and 3.7 trillion dollars in 2004.
SOURCE: Social Security Administration, Office of the Chief Actuary.