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 (2022 through 2096). 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 somewhat in about 2040 through 2055, rise temporarily between 2055 and 2078, and then decline somewhat through 2096. The projected income rate is relatively stable at about 13 percent throughout the 75-year period ending in 2096.
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. Cost is projected to exceed total income in 2022, as it did beginning in 2021, and combined OASI and DI Trust Fund reserves decline until they become depleted in 2035. After trust fund reserve depletion, continuing income is sufficient to support expenditures at a level of 80 percent of program cost for the rest of 2035, declining to 74 percent for 2096. Figure
II.D2 depicts OASDI operations as a combined whole. However, under current law, the differences between scheduled and payable benefits for OASI would begin in 2034, when the OASI Trust Fund is projected to become depleted. Scheduled benefits equal payable benefits for DI throughout the entire 75-year projection period, because the DI Trust Fund is not projected to become depleted during the period.
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 2021. This ratio had been stable, remaining between 3.2 and 3.4 from 1974 through 2008, and has generally 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 as the recovery of the economy largely offset the demographic shift during that period. The ratio declined slightly in 2020 and then increased slightly in 2021, due to effects of the pandemic-induced recession and recovery on the number of workers. The underlying demographic shift will continue to drive this ratio down over the next 10 to 15 years. The ratio of workers to beneficiaries reaches 2.3 by 2033 when the baby-boom generation will have largely retired, and will generally decline very gradually thereafter due to increasing longevity.
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 accumulated 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 (2022 through 2096) 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 231 percent of cost in 2043, and then decline to 53 percent of cost by 2096.
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 2021 to 2096. 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 about $2.85 trillion at the end of 2021. The combined trust fund reserves decline on a present value basis after 2021, but remain positive through 2034. However, after 2034 this cumulative amount declines and becomes negative in 2035, which means that the combined OASI and DI Trust Funds have a net unfunded obligation through the end of each year after 2034. Through the end of 2096, the combined funds have a present-value unfunded obligation of $20.4 trillion. If the assumptions, methods, starting values, and the law had all remained unchanged from last year, the unfunded obligation in this year’s report would have risen to about $20.6 trillion due to the change in the valuation date and the extension of the valuation period through an additional year, 2096.
Figures II.D2,
II.D4, and
II.D5 show that the program’s financial condition will deteriorate throughout the projection period if current law is not altered. Negative annual balances and increasing cumulative shortfalls 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 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
4.5 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 2069, 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 2069 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.
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 higher (less negative) in all years from 2022 through 2096. For the full 75-year projection period, the annual balances are higher, on average, by 0.18 percentage point.
