WASHINGTON – The Social Security Board of Trustees recently released its annual report on the financial status of the Social Security Trust Funds – and the outlook is grim.
The combined asset reserves of the Old-Age and Survivors Insurance and Disability Insurance Trust Funds are projected to be depleted in 2035, one year later than projected last year, with 80% of benefits payable at that time.
The OASI Trust Fund is projected to be exhausted in 2034, one year later than last year’s estimate, with 77% of benefits payable at that time. The DI Trust Fund asset reserves are not projected to become depleted during the 75-year projection period.
In the 2022 annual report to Congress, the trustees announced:
Ÿ The asset reserves of the combined OASI and DI Trust Funds declined by $56 billion in 2021 to a total of $2.852 trillion.
Ÿ The total annual cost of the program is projected to exceed total annual income this year and remain higher throughout the 75-year projection period. Total cost began to be higher than total income in 2021. Social Security’s cost has exceeded its non-interest income since 2010.
Ÿ The year when the combined trust fund reserves are projected to become depleted, if Congress does not act before then, is 2035 – one year later than last year’s projection. At that time, there would be sufficient income coming in to pay 80% of scheduled benefits.
“The findings of this report are certainly troubling,” said U.S. Rep. Tom Cole, Oklahoma’s 4th District Congressman. “It is time to act and ensure hardworking Americans receive the benefits they have rightfully earned. That is why earlier this year I reintroduced the Bipartisan Social Security Commission Act to address the long-term solvency of Social Security and its programs.”
“It is important to strengthen Social Security for future generations. The trustees recommend that lawmakers address the projected trust fund shortfalls in a timely way in order to phase in necessary changes gradually,” said Kilolo Kijakazi, acting commissioner of Social Security. “Social Security will continue to be a vital part of the lives of 66 million beneficiaries and 182 million workers and their families during 2022.”
Other highlights of the Trustees Report include:
Ÿ Total income, including interest, to the combined OASI and DI Trust Funds in 2021 amounted to $1.088 trillion ($980.6 billion from net payroll tax contributions, $37.6 billion from taxation of benefits, and $70.1 billion in interest).
Ÿ Total expenditures from the combined OASI and DI Trust Funds in 2021 amounted to nearly $1.145 trillion.
Ÿ Social Security paid benefits of $1.133 trillion in calendar year 2021. There were about 65 million beneficiaries at the end of the calendar year.
Ÿ The projected actuarial deficit over the 75-year long-range period is 3.42% of taxable payroll – lower than the 3.54% projected in last year’s report.
Ÿ Asset reserves held in special issue U.S. Treasury securities declined from $2.9 trillion at the beginning of 2021 to $2.85 trillion at the end of the year.
Ÿ During 2021 an estimated 179 million people had earnings covered by Social Security and paid payroll taxes.
Ÿ The cost of $6.5 billion to administer the Social Security program in 2021 was a very low 0.6% of total expenditures.
Ÿ The combined trust fund asset reserves earned interest at an effective annual rate of 2.5% in 2021.
Benefits provided
to 65M Americans
At the end of 2021 the OASDI program was providing benefit payments to approximately 65 million people: 50 million retired workers and dependents of retired workers, six million survivors of deceased workers, and nine million disabled workers and dependents of disabled workers.
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 by more than half in the next decade: from $2.85 trillion at the beginning of 2022 to $1.25 trillion at the end of 2031, 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 230% at the beginning of 2022 to 74% at the beginning of 2031. Because this ratio falls below 100% by the beginning of the tenth projection year, the combined OASI and DI Trust Funds fail the Trustees’ test of short-range financial adequacy.
The DI program continued to have low levels of disability applications and benefit awards for 2021. Disability applications have declined substantially since 2010, and the total number of disabled-worker beneficiaries in current payment status has been falling since 2014.
OASDI’s 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 two 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 2096, the cost is projected to grow somewhat slower than income as birth rates return to a level of two children per woman for 2056 and thereafter.
Over the 75-year long-range period 2022-96, the projected OASDI annual cost rate increases from 14.05% of taxable payroll for 2022 to 18.32% for 2078, and then decreases to 17.64% for 2096.