2024 OASDI Trustees Report

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D. LONG-RANGE SENSITIVITY ANALYSIS
This appendix presents estimates that illustrate the sensitivity of the long-range actuarial status of the OASDI program to changes in selected individual assumptions. The estimates based on the three alternative sets of assumptions, which were presented earlier in this report, illustrate the effects of varying all of the principal assumptions simultaneously, in order to portray a significantly more optimistic or pessimistic future. For each sensitivity analysis presented in this appendix, the intermediate alternative II projection is the reference point, and one assumption is varied within that alternative. The variation used for each individual assumption is the same as the level used for that assumption in the low-cost alternative I and high-cost alternative III projections.
Each table in this section shows the effects of changing a particular assumption on the OASDI summarized income rates, summarized cost rates, and actuarial balances for 25-year, 50-year, and 75-year valuation periods. Each table also shows the effects on the annual balance for 2098 and on the year of combined trust fund reserve depletion. Following each table is a discussion of the estimated changes in cost rates. The change in each of the actuarial balances is approximately equal to the change in the corresponding cost rate, but in the opposite direction. This appendix does not discuss income rates following each table because income rates vary only slightly with changes in assumptions that affect revenue from taxation of benefits.
1. Total Fertility Rate
Table VI.D1 shows selected measures of OASDI actuarial status on the basis of alternative II with three different assumptions for the future paths of total fertility rates. The Trustees assume that the ultimate total fertility rate will be 1.6, 1.9, and 2.1 children per woman under alternatives III, II, and I, respectively. The ultimate total fertility rate is reached in 2040.

a
The total fertility rate for any year is the average number of children that would be born to a woman if she were to experience, at each age of her life, the birth rate observed in, or assumed for, the selected year, and if she were to survive the entire childbearing period. The ultimate total fertility rate is reached in 2040 under all three alternatives.

b
The total fertility rates used for this analysis are consistent with those assumed for the three alternative scenarios. All other assumptions used for this analysis are from alternative II.

For the 25-year period, the cost rate for the three fertility assumptions varies by only about 0.02 percent of taxable payroll. In contrast, the 75-year cost rate varies over a wide range, decreasing from 18.07 percent to 16.81 percent, as the ultimate total fertility rate increases from 1.6 for alternative III to 2.1 for alternative I. Similarly, while the 25-year actuarial balance varies by only 0.02 percent of taxable payroll, the 75-year actuarial balance varies over a much wider range, from ‑4.20 percent to ‑3.05 percent.
During the 25-year period, the effects of the very slight increases in the working-age population on tax income resulting from higher fertility (than that experienced in an alternative scenario) are more than offset by the effects of decreases in female labor force participation and increases in the number of child beneficiaries. Therefore, 25-year program cost as a percent of taxable payroll increases slightly with higher fertility. For the 75‑year long-range period, however, changes in fertility have a relatively greater effect on the working-age population than on the beneficiary population. As a result, an increase in fertility significantly reduces the cost rate. Each increase of 0.1 in the average total fertility rate increases (improves) the long-range actuarial balance by about 0.23 percent of taxable payroll.
2. Death Rates
Table VI.D2 shows selected measures of OASDI actuarial status on the basis of alternative II with three different assumptions about future reductions in death rates for the period from 2033 to 2098. These assumptions are described in section V.A.2. Under the Trustees’ assumptions, the age-sex-adjusted death rates1 decline at average annual rates of 0.28 percent, 0.73 percent, and 1.23 percent for alternatives I, II, and III, respectively.

a
The average annual death-rate reduction is the average annual geometric rate of decline in the age-sex-adjusted death rate for the period from 2033 to 2098.

b
The death-rate reductions used for this analysis are consistent with those assumed for the three alternative scenarios. All other assumptions used for this analysis are from alternative II.

The variation in cost for the 25-year period is less pronounced than the variation for the 75-year period because decreases in death rates have cumulative effects. The 25-year cost rate increases from 16.36 percent (for an average annual death-rate reduction of 0.28 percent from 2033 to 2098) to 16.83 percent (for an average annual death-rate reduction of 1.23 percent from 2033 to 2098). The 75-year cost rate increases from 16.55 percent to 18.14 percent. The actuarial balance decreases from ‑2.07 percent to ‑2.53 percent for the 25-year period, and from -2.79 percent to ‑4.29 percent for the 75-year period.
Lower death rates raise both the income (through increased taxable payroll) and the cost of the OASDI program. The relative increase in cost, however, exceeds the relative increase in taxable payroll. For any given year, reductions in the death rates for people who are age 62 and over (ages at which death rates are the highest) increase the number of retired-worker beneficiaries (and, therefore, the amount of retirement benefits paid) without adding significantly to the number of covered workers (and, therefore, to the taxable payroll). Reductions in death rates for people at age 50 to retirement eligibility age result in significant increases to the taxable payroll. However, those increases are not large enough to offset the sum of the additional retirement benefits mentioned above and the disability benefits paid to additional beneficiaries at these pre-retirement ages, which are ages of high disability incidence. At ages under 50, death rates are so low that even substantial reductions in death rates do not result in significant increases in the numbers of covered workers or beneficiaries. Consequently, if death rates decline by about the same relative amount for all ages, the cost increases faster than the rate of growth in payroll, which results in higher cost rates and lower actuarial balances. Each additional 0.1‑percentage-point increase in the average annual rate of decline in the death rate decreases (worsens) the long-range actuarial balance by about 0.16 percent of taxable payroll.
3. Immigration
Table VI.D3 shows selected measures of OASDI actuarial status under alternative II with three different assumptions about the magnitude of total net immigration (sum of net lawful permanent resident (LPR) immigration and net other-than-LPR immigration). See section V.A.3 for more information on immigration assumptions and methods. Under the Trustees’ assumptions, total net annual immigration averages 829,000 persons, 1,244,000 persons, and 1,683,000 persons for the period 2034 through 2098 under alternatives III, II, and I, respectively.

a
Average annual total net immigration is the annual total net immigration to the Social Security area, including both LPR and other-than-LPR immigration, averaged for 2034 through 2098.

b
The total net immigration assumptions used for this analysis are consistent with those assumed for the three alternative scenarios. All other assumptions used for this analysis are from alternative II.

For all three periods, when total net immigration increases, the cost rate decreases. For the 25-year period, the cost rate decreases from 16.80 percent of taxable payroll (for average annual total net immigration of 829,000 persons for 2034 through 2098) to 16.34 percent (for an average annual total net immigration of 1,683,000 persons for 2034 through 2098). For the 50-year period, it decreases from 17.31 percent to 16.62 percent, and for the 75-year period, it decreases from 17.75 percent to 16.87 percent. The actuarial balance increases from ‑2.48 percent to ‑2.08 percent for the 25-year period, from ‑3.37 percent to -2.76 percent for the 50-year period, and from ‑3.90 percent to ‑3.12 percent for the 75-year period.
The cost rate decreases with an increase in total net immigration because immigration occurs at relatively young ages, thereby increasing the numbers of covered workers earlier than the numbers of beneficiaries. Increasing average annual total net immigration by 100,000 persons increases (improves) the long-range actuarial balance by about 0.09 percent of taxable payroll.
4. Real Wage Growth
Table VI.D4 shows selected measures of OASDI actuarial status on the basis of alternative II with three different assumptions about the real growth rate in the average annual wage in OASDI covered employment. Under the Trustees’ assumptions, the average annual real growth rate in the average wage in covered employment from 2033 to 2098 is 0.53 percent, 1.14 percent, and 1.74 percent under alternatives III, II, and I, respectively.

a
The average annual real wage growth is the average annual real growth rate in the average wage in OASDI covered employment from 2033 to 2098.

b
The real wage growth assumptions used for this analysis are consistent with those assumed for the three alternative scenarios. All other assumptions used for this analysis are from alternative II.

For the 25-year period, the cost rate decreases from 17.39 percent (for a real growth rate in the average wage in OASDI covered employment of 0.53 percent) to 15.76 percent (for a real growth rate of 1.74 percent). For the 50-year period, it decreases from 18.16 percent to 15.78 percent, and for the 75-year period it decreases from 18.64 percent to 15.97 percent. The actuarial balance increases from -2.99 percent to -1.57 percent for the 25-year period, from ‑4.11 percent to -2.02 percent for the 50-year period, and from ‑4.68 percent to ‑2.32 percent for the 75-year period.
The cost rate decreases with increasing real wage growth. Higher wages increase taxable payroll immediately, but they increase benefit levels only gradually as new beneficiaries become entitled. In addition, cost-of-living adjustments (COLA) to benefits depend not on changes in wages, but on changes in prices. Each 0.1-percentage-point increase in real wage growth increases (improves) the long-range actuarial balance by about 0.19 percent of taxable payroll.
5. Consumer Price Index
Table VI.D5 shows selected measures of OASDI actuarial status on the basis of alternative II with three different assumptions about the rate of increase for the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI). Under the Trustees’ assumptions, the annual increase in the CPI is 3.00 percent, 2.40 percent, and 1.80 percent under alternatives I, II, and III, respectively. These ultimate rates of increase are reached by 2026 under all three alternatives.

a
The CPI assumptions used for this analysis are consistent with those assumed for the three alternative scenarios. All other assumptions used for this analysis are from alternative II.

For all three periods, the cost rate increases when the assumed rates of increase in the CPI are smaller. For the 25-year period, the cost rate increases from 16.47 percent (for a CPI increase of 3.00 percent) to 16.67 percent (for a CPI increase of 1.80 percent). For the 50-year period, it increases from 16.83 percent to 17.10 percent, and for the 75-year period, it increases from 17.14 percent to 17.44 percent. The actuarial balance decreases from ‑2.19 percent to -2.36 percent for the 25-year period, from ‑2.94 percent to ‑3.18 percent for the 50-year period, and from ‑3.36 percent to ‑3.63 percent for the 75-year period.
The time lag between the effects of the CPI changes on taxable payroll and on scheduled benefits explains these patterns. When the rate of increase in the CPI is greater and real wage growth is constant, then: (1) the effect on taxable payroll due to a greater rate of increase in average wages occurs immediately and (2) the effect on benefits due to a larger COLA occurs with a lag of about 1 year. As a result of these effects, the higher taxable payrolls have a stronger effect than the higher benefits, which results in lower cost rates. Each 0.1‑percentage-point decrease in the rate of the change in the CPI decreases (worsens) the long-range actuarial balance by about 0.02 percent of taxable payroll.
6. Real Interest Rate
Table VI.D6 shows selected measures of OASDI actuarial status under alternative II with three different assumptions about the annual real interest rate (compounded semiannually) for special public-debt obligations issuable to the trust funds. Under the Trustees’ assumptions, the ultimate annual real interest rate is 1.8 percent, 2.3 percent, and 2.8 percent under alternatives III, II, and I, respectively. These ultimate rates are reached by 2041 under all three alternatives. In each case, the ultimate annual increase in the CPI is 2.40 percent, which is consistent with alternative II. Therefore, the ultimate annual yields are 4.2, 4.8, and 5.3 percent, respectively.

a
The annual real interest rate is the effective annual yield on asset reserves held by the trust funds divided by the annual rate of growth in the CPI.

b
The real interest rate assumptions used for this analysis are consistent with those assumed for the three alternative scenarios. All other assumptions used for this analysis are from alternative II.

For the 25-year period, the cost rate decreases with increasing real interest rates from 16.63 percent (for an ultimate real interest rate of 1.8 percent) to 16.52 percent (for an ultimate real interest rate of 2.8 percent). For the 50‑year period, it decreases from 17.07 percent to 16.87 percent and, for the 75‑year period, it decreases from 17.44 percent to 17.16 percent. The actuarial balance increases from -2.37 percent to ‑2.19 percent for the 25-year period, from ‑3.21 percent to ‑2.91 percent for the 50-year period, and from ‑3.69 percent to -3.31 percent for the 75-year period. A relatively higher real interest rate has the effect of discounting more distant future years relatively more. To the extent that annual cost rates and annual deficits are larger in later years, a higher interest rate decreases the summarized rates, and a lower interest rate increases the summarized rates. Each 0.1-percentage-point increase in the real interest rate increases (improves) the long-range actuarial balance by about 0.04 percent of taxable payroll.
7. Taxable Ratio
Table VI.D7 shows selected measures of OASDI actuarial status under alternative II with three different assumptions about the ratio of taxable payroll to OASDI covered earnings (the taxable ratio). Note that covered earnings are the sum of wages and net self-employment earnings covered by Social Security, and taxable payroll is essentially the amount of covered earnings subject to the Social Security payroll tax up to the contribution and benefit base ($168,600 for 2024). Under the Trustees’ assumptions, the taxable ratio at the end of the short-range period (2033) is 81.0 percent, 82.5 percent, and 84.0 percent under alternatives III, II, and I, respectively.
Taxable ratio in 2033 a b

a
The taxable ratio is the ratio of taxable payroll to OASDI covered earnings. These concepts are described in further detail in section V.C.6 of this report.

b
The taxable ratio assumptions used for this analysis are consistent with those assumed for the three alternative scenarios. All other assumptions used for this analysis are from alternative II.

Because the combined employee-employer tax rate of 12.4 percent is unchanged across all alternatives, the income rate changes a relatively small amount as the taxable ratio increases, due to changes in taxation of benefits and the initial fund as a percentage of taxable payroll.
For the 25-year period, the cost rate decreases with increasing taxable ratios, from 16.81 percent (for a taxable ratio in 2033 of 81.0 percent) to 16.34 percent (for a taxable ratio in 2033 of 84.0 percent). For the 50-year period, it decreases from 17.18 percent to 16.75 percent and, for the 75-year period, it decreases from 17.49 percent to 17.11 percent. The actuarial balance increases from ‑2.48 percent to ‑2.08 percent for the 25-year period, from ‑3.26 percent to ‑2.87 percent for the 50-year period, and from ‑3.68 percent to ‑3.33 percent for the 75‑year period.
The cost rate decreases with an increase in taxable payroll because the increase in taxable payroll occurs immediately. The increase in benefit amounts occurs much more gradually as new beneficiaries become entitled. In addition, the change in the taxable ratio does not affect COLAs or the national average wage index. Each 1.0 percentage-point increase in the taxable ratio in 2033 increases (improves) the long-range actuarial balance by about 0.12 percent of taxable payroll.
8. Disability Incidence Rates
Table VI.D8 shows selected measures of OASDI actuarial status on the basis of alternative II with three different assumptions about future disability incidence rates. Under the Trustees’ assumptions, the ultimate age-sex-adjusted2 incidence rate is 3.6, 4.5, and 5.4 awards per thousand exposed for alternatives I, II, and III, respectively. These ultimate rates are reached by 2033 under all three alternatives. Under the Trustees’ assumptions, incidence rates by age and sex for all three alternatives vary during the early years of the projection period before reaching their long-term average values.
Ultimate disability incidence ratea

a
The disability incidence rates used for this analysis are consistent with those assumed for the three alternative scenarios. All other assumptions used for this analysis are from alternative II.

For the 25-year period, the cost rate increases with increasing disability incidence rates, from 16.29 percent (for the relatively low rates assumed for alternative I) to 16.86 percent (for the relatively high rates assumed for alternative III). For the 50-year period, it increases from 16.63 percent to 17.30 percent, and for the 75-year period, it increases from 16.95 percent to 17.65 percent. The actuarial balance decreases from ‑2.00 percent to ‑2.55 percent for the 25-year period, from -2.74 percent to -3.38 percent for the 50-year period, and from -3.16 percent to ‑3.84 percent for the 75-year period.
9. Disability Termination Rates
Table VI.D9 shows selected measures of OASDI actuarial status on the basis of alternative II with three different assumptions about future disability termination rates, including deaths and recoveries.
Under the Trustees’ assumptions, death rates for disabled-worker beneficiaries for all three alternatives decline throughout the long-range period. The age-sex-adjusted death rate3 of 26.8 deaths per thousand disabled-worker beneficiaries in 2023 declines to 21.5, 12.4, and 6.2 deaths per thousand in 2098 for alternatives I, II, and III, respectively. These levels are about 20 percent, 54 percent, and 77 percent lower, respectively, than the level in 2023. For this sensitivity analysis, total population death rates by age and sex are assumed to be the same as those used for the alternative II assumptions.
The ultimate age-sex-adjusted recovery rate4 used for this analysis is 13.0 recoveries per thousand disabled-worker beneficiaries for the alternative I assumptions, 10.8 recoveries per thousand disabled-worker beneficiaries for the alternative II assumptions, and 8.6 recoveries per thousand disabled-worker beneficiaries for the alternative III assumptions.
Disability termination rates
(death; recovery)a

a
The disability termination rates used for this analysis are consistent with those assumed for the three alternative scenarios. All other assumptions used for this analysis are from alternative II.

For the 25-year period, the cost rate increases with decreasing disability termination rates, from 16.52 percent (for the relatively high termination rates assumed for alternative I) to 16.62 percent (for the relatively low termination rates assumed for alternative III). For the 50-year period, it increases from 16.90 percent to 17.01 percent, and for the 75-year period, it increases from 17.22 percent to 17.35 percent. The actuarial balance decreases from ‑2.23 percent to -2.32 percent for the 25-year period, from -3.00 percent to ‑3.11 percent for the 50-year period, and from -3.42 percent to ‑3.55 percent for the 75-year period.

1
Based on the enumerated total population as of April 1, 2010, if that population were to experience the death rates by age and sex for the selected year.

2
Age-sex-adjusted to the disability-exposed population as of the year 2000.

3
Age-sex-adjusted to the disabled-worker population as of the year 2000.

4
Age-sex-adjusted to the disabled-worker population as of the year 2000.


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