2002 OASDI Trustees Report

I. INTRODUCTION

The Board of Trustees of the Social Security Trust Funds reports each year on the current and projected financial condition of the Social Security program, which is financed through two separate trust funds. The Old-Age and Survivors Insurance (OASI) Trust Fund pays monthly benefits to retired workers (including disabled workers who have reached normal retirement age) and their families and to survivors of deceased workers. The Disability Insurance (DI) Trust Fund pays monthly benefits to disabled workers and their families.¹ The report on the current financial status of the funds includes an accounting of the actual income and expenditures for the last year. For future years, the projections of the trust funds' financial condition reflect the Trustees' considered judgment after review of available evidence and expert opinion about all the demographic, economic, and program-specific factors that affect income and expenditures. Projections are presented separately for the next 10 years (the short range) and for the next 75 years (the long range).

Although, in general, a greater degree of certainty can be presumed for projections encompassing the next few years than for a period as long as the next 75 years, any estimation of future experience is uncertain. Therefore, three alternative sets of demographic, economic, and program-specific assumptions are used to show a range of possible outcomes for all projections. The "intermediate" set of assumptions, designated as alternative II, reflects the Trustees' "best estimates" of future experience; the "low cost" alternative I is more optimistic, and the "high cost" alternative III more pessimistic for the trust funds' future financial outlook. For both the short range and the long range, however, it is important to understand that the projections in this report are only an indication of the expected trend and of the likely range of future trust fund experience. Also, all projections are based on the Social Security program provisions in current law and are not intended to anticipate any changes in these provisions that might be made in the future.

For this report, demographic, economic, and program-specific factors were updated based on recent experience. On balance this experience was slightly less favorable than expected in its impact on the immediate status of the trust funds, principally due to the economic slowdown of 2001. The most significant changes in assumptions for the future were for mortality and real wage growth. Based on these and other changes, projected annual balances for the Social Security program (tax income minus cost obligations) are generally larger in this report for about the next 40 years, but are smaller thereafter. As a result, the projected financial status of the program shown in this report is more favorable by the end of the short range, but about the same for the long range as a whole.

¹ See appendix A for a description of these funds and a history of their operations.

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