2023 OASDI Trustees Report

E. CONCLUSION

The data and projections presented in this report continue to include the Trustees’ best estimates of the future course of the population, the economy, and all aspects of the OASDI program under current law. Now, more than 3 years after the start of the COVID-19 pandemic, the acute stage of the pandemic appears to be over, but the Trustees expect there will be residual effects on the population and the economy for years to come. Since the assumptions for last year’s report were set, the Trustees have reassessed their expectations for the economy in light of recent developments, including updated data on inflation and output, and have revised down the levels of gross domestic product (GDP) and labor productivity by about 3 percent over the projection period. Assumptions for growth are largely unchanged after the first 10 years of the projection period. The intermediate (best estimate) assumptions for this report were set in December 2022. The Trustees will continue to monitor developments and modify the projections in later reports.

Under current law, the projected cost of Social Security generally increases faster than projected income through about 2040 primarily because the ratio of workers paying taxes to beneficiaries receiving benefits will decline as the baby-boom generation continues to retire and is replaced at working ages with subsequent lower birth-rate generations. The effects of the aging baby boom and subsequent lower birth rates will have largely stabilized between about 2040 and 2055, but annual cost is projected to grow significantly faster than income between 2055 and 2078 due to the period of historically low birth rates starting with the recession of 2007-09. Between 2078 and 2097, cost is projected to grow somewhat slower than income, reflecting an assumed return to a stable ultimate birth rate of 2 children per woman for 2056 and thereafter. Based on the Trustees’ intermediate assumptions, Social Security’s cost exceeds total income in 2023, as it has beginning in 2021, and remains higher throughout the remainder of the 75‑year projection period.

The OASI Trust Fund is projected to have sufficient reserves to pay full benefits on time until 2033. The DI Trust Fund is projected to have sufficient reserves to pay full benefits throughout the 75-year projection period ending in 2097. Legislative action will be needed to prevent OASI reserve depletion. In the absence of such legislation, continuing income to the trust funds at the time of reserve depletion would be sufficient to pay 77 percent of OASI benefits.

Social Security’s combined trust funds are projected to cover full payment of scheduled benefits on a timely basis until the trust fund reserves become depleted in 2034. Full payment of benefits until depletion of the hypothetical combined reserves in 2034 implicitly assumes that the law will have been changed to permit the transfer of funds between OASI and DI as needed. At the time of reserve depletion, projected continuing income to the combined trust funds equals about 80 percent of the program cost. By 2097, continuing income equals about 74 percent of the program cost.

The actuarial deficit for the combined trust funds under the intermediate assumptions is 3.61 percent of taxable payroll for the 75-year period through 2097, increased (worsened) from the 3.42 percent deficit for the 75-year period through 2096 in last year’s report. To illustrate the magnitude of the deficit, consider that for the combined OASI and DI Trust Funds to remain fully solvent throughout the 75-year projection period ending with 2097: (1) revenue would have to be increased by an amount equivalent to an immediate and permanent payroll tax rate increase of 3.44 percentage points to 15.84 percent; (2) scheduled benefits would have to be reduced by an amount equivalent to an immediate and permanent reduction of 21.3 percent applied to all current and future beneficiaries through 2097, or 25.4 percent if the reductions were applied only to those who become initially eligible for benefits in 2023 or later; or (3) some combination of these approaches would have to be adopted. If actions are deferred for several years, the changes necessary to maintain Social Security solvency through 2097 become concentrated on fewer years and fewer generations.

If lawmakers design legislative solutions only to eliminate the overall actuarial deficit without consideration of year-by-year financing, then a substantial financial imbalance could remain for 2097, the end of the 75-year valuation period. In that case, the long-range sustainability of program financing could still be in doubt. Sustainable solvency for the financing of the program under a specified set of assumptions is achieved when the projected trust fund ratio is positive throughout the 75-year long-range period and is either stable or rising at the end of the period. Making changes now that achieve sustainable solvency could avoid the need for later legislative changes.

Lawmakers have a broad continuum of policy options that would close or reduce Social Security's long-term financing shortfall. Estimates for many such policy options are available at www.ssa.gov/OACT/solvency/provisions/. Broadly speaking, the approaches that lawmakers can take include increasing revenue from workers and employers by raising the tax rate or the maximum level of taxable earnings, or by dedicating revenue from other sources; lowering benefits for some or all beneficiaries by changing certain program parameters; or a combination of these approaches. There are many variations on these options, including those that vary the timing, magnitude, and other specifics of the changes under consideration.

The Trustees recommend that lawmakers address the projected trust fund shortfalls in a timely way in order to phase in necessary changes gradually and give workers and beneficiaries time to adjust to them. Implementing changes sooner rather than later would allow more generations to share in the needed revenue increases or reductions in scheduled benefits. Social Security will play a critical role in the lives of 67 million beneficiaries and 180 million covered workers and their families during 2023. With informed discussion, creative thinking, and timely legislative action, Social Security can continue to protect future generations.

For further information related to the contents of this report, see the following websites:

•	www.ssa.gov/OACT/tr/2023/

•	www.ssa.gov/OACT/solvency/provisions/

•	https://www.cms.gov/OACT/TR/2023

•	https://home.treasury.gov/policy-issues/economic-policy/social-security-and-medicare-trustee-reports