Yesterday, the Social Security Board of Trustees released their annual report.
Let’s take a look at their projections and some global comparisons.
Social Security Projections and Comparisons
For Social Security, the basic numbers to remember are 58.6 million, $1,227.4 trillion, and 183 million. With 58.6 million individuals receiving $1,227.4 trillion in benefits, Social Security has close to 183 million people providing payroll tax funding.
Our basic numbers are for Old Age and Survivors Insurance (OASI), the destination for most Social Security funding. The other recipient categories include disabilities, hospital insurance, and supplementary Medical Insurance.
Projections
We can start with the Social Security Trust Fund. Knowing that the revenue from current workers might not be enough for current beneficiaries, the Congress buoyed the trust fund in 1983. Replenished whenever the System’s income exceeds its expenses, the trust fund is the back-up. And happily, it has been there for the extra money we’ve needed since 2021. However, if all continues as the Trustees predict, little by little, the trust fund will shrink until 2033 when it will be empty. Having inadequate income, the System’s payout would have to be 79% of “scheduled benefits.”
However, Congress could combine the healthier Disabilities Trust Fund with the Old Age and Survivors Insurance. Then, as below, it becomes OASDI. Alone, OASI is depleted in 2033 while together with DI as OASDI, we get another two years:
Next, moving our time horizon further ahead, we see the deficits increase. Over the next 75 years, the projected OASDI shortfall will be close to 3.5% of payroll income.
More generally, we can predict our declining fertility rate (from 2.0 to 1.9 children per woman) will produce fewer babies that will grow up to fund Social Security. On the spending side, we have more baby boomer retirees that will be living longer. One happy note is the immigration that will add to payroll revenue.
Comparisons
When we look at the world, it does not get any better. With the Netherlands at the top and Argentina at the bottom, the Global Pension Index gave the U.S. a C+ grade. The Netherlands, Iceland, Denmark, and Israel were the only countries that received an “A.” Next, we have Australia, Finland, and Singapore, each with a B+.
At #22 out of 47 retirement systems, the United States’s C+ was based on an Adequacy, Sustainability, and Integrity score. Its 66.7 for Adequacy indicated the system was insufficiently funded. Correspondingly, the 61.1 for Sustainability reflected the system’s demography, assets, and debt. Then, the 59.5 Integrity grade focused on governance-related issues. Together they wound up as a C+ and a middling position in the world’s pensions.
I’ve copied the top 22 from the Mercer report:
Our Bottom Line: Social Security Solvency
The United States has three big Social Security problems. We need relatively more workers and fewer older people. But that probably won’t happen. We need people to retire later. But many workers are unable to wait. And we need more revenue. But no one wants higher taxes (although raising the wealthiest peoples’ taxes is the most popular policy solution).
My sources and more: For more detail on Social Security projections, do take a look at the Trustees Report summary and the 277 page report. Then, for the international comparison, the Mercer CFA Institute Global Pension 2023 Report has the details. Meanwhile, this excellent Brookings article focused on how immigration could solve Social Security problems. In addition, the Center on Budget and Policy Priorities looked at raising the retirement age. And finally, these econlife past posts, here and here, had even more.
Please note that today’s post is an updated version of past Social Security reports.
