The Trustees make basic assumptions for several of these factors based on analysis of historical trends, historical conditions, and expected future conditions. These factors include fertility, mortality, immigration, marriage, divorce, productivity, inflation, average earnings, unemployment, real interest rate, and disability
incidence and
termination. Other factors depend on these basic assumptions. These other, often interdependent, factors include total population, life expectancy, labor force participation,
gross domestic product, and program-specific factors. Each year the Trustees reexamine these assumptions and methods in light of new information and make appropriate revisions. The Trustees selected the assumptions for this report by the end of December 2015.
Future levels of these factors and their interrelationships are inherently uncertain. To address these uncertainties, this report uses three sets of assumptions, designated as intermediate (alternative II),
low-cost (alternative I), and
high-cost (alternative III). The intermediate set represents the Trustees’ best estimate of the future course of the population and the economy. With regard to the net effect on the actuarial status of the OASDI program, the low-cost set is more optimistic and the high-cost set is more pessimistic. The low-cost and high-cost sets of assumptions reflect significant potential changes in the interrelationships among factors, as well as changes in the values for individual factors.
The following sections briefly discuss the various assumptions and methods required to make the estimates of trust fund financial status, which are the heart of this report.
1 There are, of course, many interrelationships among these factors that are important but are beyond the scope of this discussion.
Birth rates by single year of age, for women aged 14 to 49,
2 are the basis for the fertility assumptions. These rates apply to the total number of women, across all marital statuses, in the midyear population at each age. Table
V.A1 displays the historical and projected total fertility rates.
3 Historical death rates are calculated for years 1900 through 2013 for ages below 65 (and for all ages for years prior to 1968) using data from the National Center for Health Statistics (NCHS).
4 For ages 65 and over, final
Medicare data on deaths and enrollments for years 1968 through 2012 and preliminary data for 2013 are used. Death rates by cause of death are produced for all ages for years 1979‑2013 using data from the NCHS.
The total age-sex-adjusted death rate
5 declined at an average annual rate of 1.05 percent between 1900 and 2013. Between 1979 and 2013, the period for which death rates were analyzed by cause, the total age-sex-adjusted death rate, for all causes combined, declined at an average rate of 0.93 percent per year.
Table V.A1 contains historical and projected age-sex-adjusted death rates for the total population (all ages), for ages under 65, and for ages 65 and over. Age-sex adjustment eliminates the effect of a changing distribution of population by age and sex, allowing the pure effects of changes in death rates to be observed. Under the intermediate assumptions, projected age-sex-adjusted death rates are, in general, slightly higher than the death rates in last year’s report. These changes primarily result from incorporating additional historical data and from beginning the transition to the ultimate rates of improvement immediately after the final historical data year. Prior to this year’s report, rates of improvement after the last historical data year and before the first year of the projection period were assumed to be the same as the average annual rates of improvement over the prior 10 years.
Demographers express a wide range of views on the likely rate of future decline in death rates. For example, some believe that the long-standing historical tendency for mortality to decline more slowly at the highest ages will cease in the future. Others believe that biological factors, social factors, and limitations on health care spending may slow future rates of decline in mortality.
6 This report presents a July 1 (i.e., midyear) population for each year, which is derived from surrounding December populations. Table V.A3 shows the historical and projected population for July 1 by broad age group, for the three alternatives. It also shows the aged and total dependency ratios (see table footnotes for definitions).
Life expectancy at a given age reflects death rates at that and all older ages. Period life expectancy is somewhat related to the age-sex-adjusted death rate discussed in section V.A.2. However, life expectancy places far greater weight on death rates at lower ages than at higher ages. Therefore, changes in death rates at lower ages have far greater effects in changing life expectancy over time. It is important to keep this concept in mind when considering trends in life expectancy.
