CONGRESS OF THE UNITED STATES

CONGRESSIONAL BUDGET OFFICE

The Outlook for Social Security

JUNE 2004

1985 1995 2005 2015 2025 2035 2045 2055 2065 2075 2085 2095

0

3

4

5

6

7

8

9

10

 Potential Range of Social Security Outlays

and Revenues Under Current Law

Percentage of GDP

Actual Projected

Outlays

Revenues

The Congress of the United States O Congressional Budget Office

CBO

The Outlook for Social Security

June 2004

A

STUDY
Notes

All of the years referred to in this study are calendar years.

Numbers in the text and tables may not add up to totals because of rounding.
Preface

Over the past several years, as lawmakers have become more aware of long-term pressures facing the federal government, the Congressional Budget Office (CBO) has been asked 

to evaluate the long-term economic and budgetary implications of current laws governing 

major entitlement programs and of legislative changes to those programs. In accordance with 

its mission to provide the Congress with budget projections and estimates of the costs of legislation, CBO has sought to enhance its capacity to produce long-term analyses. As a starting 

point, the agency presented comprehensive 50-year scenarios for the federal budget in December 2003 in The Long-Term Budget Outlook. 

This updated study presents more-detailed 100-year projections for Social Security under current law, as a prelude to evaluating any legislation affecting that program. The report focuses 

on the resource demands of the Social Security system, the program’s finances, and projections 

of the benefits received by individuals in different age and income groups. In keeping with 

CBO’s mandate to provide objective analysis, the study makes no recommendations. (Background on Social Security, including information about the program’s structure and financing, 

underlying demographic trends, and strategies that have been proposed to prepare for the 

aging of the U.S. population, can be found in an earlier CBO publication, Social Security: 

A Primer, published in September 2001).

Noah Meyerson, Amy Rehder Harris, and Josh O’Harra of CBO’s Health and Human 

Resources Division wrote this study. They and Kevin Perese, John Sabelhaus, Michael Simpson, and Julie Topoleski contributed to the underlying research and techniques. Paul Cullinan, Robert Dennis, Douglas Hamilton, Arlene Holen, Ben Page, Elizabeth Robinson, John 

Sabelhaus, Robert Shackleton, Ralph Smith, Robert Sunshine, and Thomas Woodward 

reviewed the study and provided helpful comments.

Members of CBO’s Long-Term Modeling Advisory Panel—Barry P. Bosworth, Dan L. Crippen, Roland (Guy) King, Thomas E. MaCurdy, Olivia S. Mitchell, John Rust, Sylvester J. 

Schieber, and C. Eugene Steuerle—provided considerable assistance in reviewing this analysis. 

In addition, many analysts from the Social Security Administration’s Office of the Chief Actuary were generous in contributing their time and sharing data. (The assistance of such external 

participants implies no responsibility for the final product, which rests solely with CBO.)

Christian Spoor edited the study, and John Skeen proofread it. Maureen Costantino produced 

the cover and prepared the report for publication. Lenny Skutnik printed the initial copies, 

and Annette Kalicki prepared the electronic versions for CBO’s Web site (www.cbo.gov).

Douglas Holtz-Eakin

Director

June 2004

Summary vii

1 Projections of Social Security’s Finances 1

The Social Security Program at Present 1

Current-Law Projections of Social Security 2

2 Projections of Benefit Levels for

Different Age and Income Groups 11

First-Year Retirement Benefits 11

First-Year Replacement Rates 12

Lifetime Retirement Benefits 13

Total Lifetime Payroll Taxes and OASDI Benefits 15

Conclusions 18

3 Assumptions and Methods Used in This Analysis 21

CBO’s Approach to Making Social Security

Projections 21

The Uncertainty of Long-Term Social Security

Projections 26

A Differences from the Trustees’ 2004 Report 29

B Individual Benefit Measures

for Male and Female Beneficiaries 33

CONTENTS
vi THE OUTLOOK FOR SOCIAL SECURITY

Tables

1-1. Social Security Outlays and Revenues in Selected Years, 

2003 to 2100 4

1-2. Summarized Social Security Outlays, Revenues, and Balances 7

2-1. Measures of the Benefits Received by the Median Retired 

Worker, by Birth Cohort and Earnings Level 14

A-1. CBO’s and the Social Security Trustees’ Long-Term Economic 

Assumptions 29

B-1. Measures of the Benefits Received by the Median Retired 

Worker, by Sex, Birth Cohort, and Earnings Level 34

Figures

S-1. Projected Social Security Outlays and Revenues Under Current Law,

1985 to 2103 ix

1-1. Projected Social Security Outlays and Revenues Under Current Law,

1985 to 2103 5

1-2. The OASDI Trust Fund Ratio, 1985 to 2103 8

1-3. Outlays for Benefits Under Current Law and Under Projections

of Trust Fund Balances, 1985 to 2103 9

2-1. Median First-Year Retirement Benefits, by Birth Cohort 12

2-2. Median Replacement Rates, by Birth Cohort 13

2-3. Median Lifetime Retirement Benefits, by Birth Cohort 13

2-4. Potential Range of Lifetime Payroll Taxes, by Birth Cohort 

and Earnings Level 16

2-5. Potential Range of Lifetime OASDI Benefits, by Birth Cohort

and Earnings Level 17

2-6. Potential Range of the Ratio of Lifetime OASDI Benefits to Lifetime

Payroll Taxes, by Birth Cohort and Earnings Level 19

A-1. CBO’s and the Social Security Trustees’ Projections of Annual

Social Security Outlays and Revenues, 1985 to 2080 30

Box

3-1. Projecting the Taxation of Benefits Under Different Assumptions 

About Future Income Tax Rates 24
Summary

Today, 47 million Americans receive some form of 

Social Security benefit. As the baby-boom generation 

begins to retire, that number will rise considerably. Under 

the laws that currently govern Social Security, spending 

for the program will increase from about 4.4 percent of 

the nation’s gross domestic product (GDP) now to more 

than 6 percent of GDP in 2030, the Congressional Budget Office (CBO) projects. In later years, outlays will continue to grow steadily as a share of GDP, though more 

slowly. Over the long term, paying the Social Security 

benefits scheduled under current law will require economic resources totaling between 5 percent and 8 percent 

of GDP, CBO projects.

At the same time, the federal revenues dedicated to Social 

Security will remain close to their current level—about 

5 percent of GDP—in the absence of changes to the program. Thus, annual outlays for Social Security are projected to exceed revenues beginning in 2019. Even if 

spending ends up being lower than expected and revenues 

higher than expected, a gap between the two is likely to 

remain for the indefinite future. 

Only four approaches to narrowing that gap exist, and 

each of those approaches has drawbacks:

B The benefits scheduled to be paid under current law 

could be reduced, lowering Social Security’s contribution to the income of future beneficiaries.

B The taxes that fund Social Security could be increased, 

drawing additional resources from the economy to the 

program.

B The resources consumed by other federal activities 

could be cut to make up for the shortfall in Social 

Security. However, the aging of the U.S. population 

and increases in medical costs will also lead to higher 

costs for other entitlement programs, most notably 

Medicare and Medicaid.

B Federal borrowing could be increased, which would 

also draw additional resources from the economy to 

Social Security. But that borrowing would need to be 

repaid by future generations, either through higher 

taxes or lower spending.

Any changes to Social Security will have to be made in 

the context of the pressures on the total federal budget. 

CBO projects that spending for government health programs will grow even faster than spending for Social 

Security because of rising health care costs. In particular, 

increasing outlays for Medicare and Medicaid are projected to cause long-term shortfalls in the rest of the budget that will be even greater than Social Security’s. Unless 

taxation reaches levels that are unprecedented in the 

United States, current spending policies are likely to 

result in an ever-growing burden of federal debt held by 

the public, which will have a corrosive and potentially 

contractionary effect on the economy.1

Ultimately, the nation’s ability to support Social Security 

beneficiaries will depend on the size of the economy. Different changes to that program will have different economic effects. The taxes paid and benefits received by 

program participants embody important incentives that 

will affect their choices about work and saving. Decisions 

to raise revenues, borrow, or reduce spending will therefore influence economic growth. 

The long-term nature of Social Security’s structural 

imbalance—along with the desirability of phasing in any 

policy changes over many years so participants have time 

to adjust their plans accordingly—requires that analyses 

of proposed changes extend beyond the traditional 10-

year horizon of federal budget projections. Moreover, if 

the Congress considers changes to Social Security law, it 

will benefit from receiving timely analyses of the impact 

1. See Congressional Budget Office, The Long-Term Budget Outlook 

(December 2003).
viii THE OUTLOOK FOR SOCIAL SECURITY

of legislative proposals. To provide such analyses, CBO 

has developed the capacity to produce comprehensive 

long-term projections of Social Security’s finances under 

current law and under a variety of possible legislative 

changes. 

This report presents CBO’s outlook for Social Security 

over the next 100 years under current law. Projections of 

various measures of Social Security’s finances all show 

that outlays will continually grow faster than revenues, 

resulting in significant annual deficits in the system. 

Projections of benefit levels indicate that future generations will receive higher retirement benefits—and pay 

higher Social Security taxes—than current beneficiaries 

do, even after adjustment for inflation. However, those 

benefits will represent a smaller percentage of their preretirement earnings than is the case now. Such long-term 

projections are necessarily uncertain, but the general conclusions presented in this report hold true under a wide 

range of assumptions about future demographic and economic trends.

The Financial Outlook 

for Social Security

Social Security is currently running an annual surplus. In 

2003, total outlays (benefits plus administrative costs) 

equaled 4.4 percent of GDP, whereas dedicated revenues 

(Social Security payroll taxes and the income taxes that 

some recipients pay on their benefits) equaled 5.0 percent 

of GDP. CBO projects that at the end of the century, revenues will equal nearly 5 percent of GDP, about the same 

as today (see Summary Figure 1). Outlays, by contrast, 

will increase substantially in the near future with the 

retirement of the baby-boom generation. Annual spending will outstrip annual revenues starting in 2019 and 

will reach 6.1 percent of GDP in 2030—nearly 40 percent higher than in 2003. With life expectancy continuing to increase, outlays are projected to keep growing 

thereafter: to 6.3 percent of GDP in 2050 and nearly 7 

percent of GDP in 2100. CBO’s projection of a widening 

gap between outlays and revenues is consistent with other 

analyses of the outlook for Social Security. That gap is the 

key economic indication of the shortfall between the program’s spending commitments and dedicated revenues.

By running an annual surplus, the Social Security system 

as a whole currently contributes to reducing the total 

budget deficit. However, CBO’s projection indicates that 

within the next several years, that contribution will start 

to decline, and beginning in 2019, the Social Security 

system will either increase the size of the total deficit or 

reduce the size of the total surplus. That impact will grow 

over time as the system’s gap widens.

Social Security’s finances are often discussed in terms of 

the trust funds that are used in the federal budget to track 

outlays and revenues over the life of the program. Those 

trust funds are mainly accounting mechanisms and contain no economic resources. But they are important from 

a policy perspective, because Social Security’s legal spending authority each year is limited to the total balance of 

the trust funds. CBO projects that the trust funds will 

become exhausted in 2052, after which spending authority will be limited to annual revenues—which are projected at that point to equal only about 80 percent of 

scheduled benefits.

The Distribution of Taxes and Benefits

An important part of understanding the economic 

impact of Social Security is examining the distribution 

of taxes and benefits among groups of participants. This 

study provides several measures of projected benefits 

received and Social Security taxes paid by people in various age and income groups. The different measures lead 

to different insights. 

B People with high earnings receive higher benefits than 

people with low earnings do, and under current law, 

future generations will receive higher benefits than 

current beneficiaries do, even after adjustment for 

inflation.

B Future beneficiaries will live longer than today’s beneficiaries and would therefore receive greater benefits 

over their lifetime even if their annual benefits stayed 

the same.

B Under the assumption that the Social Security payroll 

tax remains a constant portion of taxable earnings, 

future generations will pay higher taxes than current 

generations do, because taxable earnings are projected 

to increase over time even after adjustment for inflation.
SUMMARY ix

Summary Figure 1.

Projected Social Security Outlays and Revenues Under Current Law,

1985 to 2103

(Percentage of GDP)

Source: Congressional Budget Office.

Note: The dark lines indicate CBO’s projections of expected outcomes. In those projections, annual Social Security outlays exceed revenues 

starting in 2019, and scheduled benefits cannot be paid beginning in 2053. Shaded areas indicate the 80 percent range of uncertainty 

around each projection. (In other words, there is a 10 percent chance that actual values will be above that range, a 10 percent chance 

that they will be below it, and an 80 percent chance that they will fall within the range. Those uncertainty ranges are based on a distribution of 500 simulations from CBO’s long-term model.)

a. Scheduled benefits and administrative costs.

b. Payroll taxes and revenues from the taxation of benefits.

B Low-earning workers have a larger percentage of their 

earnings replaced by Social Security than high earners 

do, and current beneficiaries have a larger percentage 

of their earnings replaced than future generations will. 

B In Social Security, earlier generations of participants 

received very high benefits relative to the taxes they 

paid. As a result of that windfall, later participants 

receive less in total benefits, on average, than the total 

dedicated taxes they pay. That situation reflects the 

pay-as-you-go nature of the Social Security program, 

which results in a transfer from later generations to 

earlier generations.

B For workers with low lifetime household earnings, 

total Social Security benefits received over a lifetime 

exceed dedicated taxes paid over a lifetime, on average. 

The opposite is true for workers with average and 

above-average earnings. If the projected shortfall in 

revenues led to a reduction in benefits for all workers, 

those general patterns would remain similar for each 

income group.

1985 1995 2005 2015 2035 2025 2045 2055 2065 2075 2095 2085

0

4

3

5

6

7

8

9

10

Actual Projected

Outlaysa

Revenuesb
x THE OUTLOOK FOR SOCIAL SECURITY

Analyzing the Uncertainty 

of Social Security Projections

The uncertainty about Social Security that individuals 

and policymakers face is an important economic and 

policy consideration. To display the uncertainty inherent 

in long-term projections, CBO calculates not only basic 

projections for Social Security but also ranges of possible 

outcomes. To do that, CBO uses standard statistical techniques to analyze patterns of past variation in most of 

the demographic and economic factors that underlie the 

analysis, such as fertility and mortality rates, interest 

rates, and the rate of earnings growth. It then uses its 

model to run hundreds of projections, each time with 

random variations in the assumed values for those factors 

that are equivalent to the variation observed historically. 

Although any one of those simulations has little meaning, 

together they enable CBO to display the probability distribution of possible outcomes. 

That probability distribution is shown in this study (as 

it is in Summary Figure 1) by the 80 percent range of 

uncertainty—the range within which there is an 80 percent chance that the actual value will fall. For example, 

although Social Security outlays are projected to equal 

about 6 percent of GDP in 2030, CBO’s uncertainty 

analysis indicates that there is a 10 percent chance that 

outlays will be less than 5.2 percent of GDP in that year 

and a 10 percent chance that they will exceed 7.0 percent 

of GDP. In any case, they are certain to be notably higher 

than current outlays.
1

Projections of Social Security’s Finances

Under current law, outlays for Social Security will 

rise from about 4.4 percent of gross domestic product 

(GDP) today to more than 6 percent of GDP 30 years 

from now, the Congressional Budget Office (CBO) 

projects. In later years, spending will continue to grow 

steadily, though more slowly. That projection is necessarily uncertain. But past variation in the economic and 

demographic factors underlying the projection suggests 

that over the next 50 to 100 years, Social Security’s 

demand for economic resources will range between 

5 percent and 8 percent of GDP. 

By contrast, federal revenues dedicated to Social Security 

are expected to remain close to their current level—about 

5 percent of GDP—over that period. As a result, outlays 

are projected to begin exceeding revenues in 2019, with 

the gap growing ever wider thereafter. Even if outlays for 

Social Security turn out to be lower than expected and 

revenues higher, a gap is likely to remain. 

Only four approaches to closing that gap are possible, 

each of which has its own drawbacks: 

B The benefits that are scheduled to be paid to future 

recipients under current law could be reduced, lowering Social Security’s contribution to their income.

B The taxes that fund Social Security could be raised to 

draw additional resources from the economy to the 

program.

B The resources consumed by other federal programs 

could be reduced to cover the gap between Social 

Security’s outlays and revenues. 

B The federal government’s borrowing could be 

increased, which would be another way to draw 

more resources from the economy to Social Security. 

That borrowing would need to be repaid by future 

generations, however, either through increased taxes 

or reduced federal spending.

Social Security is not the only source of pressure on the 

overall federal budget. The aging of the U.S. population 

—which is the main source of the projected increase in 

Social Security spending—will also raise costs for other 

entitlement programs. In particular, CBO projects that 

expenditures for Medicare and Medicaid will grow even 

faster than Social Security outlays because of rising health 

care costs. Unless taxation reaches levels that are unprecedented in the United States, current spending policies are 

likely to prove financially unsustainable over the long 

term because they will lead to an ever-growing burden of 

federal debt held by the public, which will have a corrosive and potentially contractionary effect on the economy.1

The Social Security Program at Present

In 2003, the federal government spent a total of $479 billion on the Social Security program. That year, about 47 

million people received Social Security benefits—29.5 

million retired workers; 5.9 million disabled workers; 

and 11.6 million family members of retired, disabled, or 

deceased workers. Social Security has two parts.2

 The 

Old-Age and Survivors Insurance (OASI) program provides benefits to retired workers, members of their famiCHAPTER

1. See Congressional Budget Office, The Long-Term Budget Outlook 

(December 2003).

2. For more information about Social Security’s structure and benefits, see Congressional Budget Office, Social Security: A Primer

(September 2001), Chapter 2. The numbers in this paragraph are 

as of December 31, 2003.
2 THE OUTLOOK FOR SOCIAL SECURITY

lies, and their survivors. The Disability Insurance (DI) 

program pays benefits to disabled workers younger than 

the normal retirement age and their dependents.3 OASI 

is by far the larger program: last year it accounted for 

about 85 percent of spending for the two parts combined 

(referred to as OASDI). On average, retired workers 

received about $11,060 in OASI benefits in 2003, and 

disabled workers received $10,340 in DI benefits. 

Benefits are financed primarily through payroll taxes, 

with half collected from employers and half from workers.4 The combined tax rate, currently 12.4 percent, is 

levied on wages and self-employment income covered by 

the OASDI program, up to the taxable maximum of 

$87,900. (That threshold rises annually with average 

earnings in the economy.) Last year, about 154 million 

workers were covered by Social Security and paid some 

payroll taxes. Their average taxable earnings were 

$28,100—for a total taxable payroll of $4.3 trillion and 

total payroll tax revenues of $534 billion. (The Medicare 

program is partially funded by a separate payroll tax, 

which raised $149 billion in 2003. References in this 

report to payroll taxes refer to Social Security taxes.)

The Social Security system also receives revenues from 

income taxes that the approximately one-third of beneficiaries with the highest income pay on their Social Security benefits.5 Those revenues are far smaller than payroll 

tax receipts: $13 billion in 2003.6

Social Security is currently running an annual surplus. In 

2003, dedicated revenues exceeded outlays by $68 billion. Viewed as a component of the overall budget, that 

surplus helped reduce the government’s total deficit in 

2003. However, Social Security also has a distinct, specific accounting structure. Revenues from payroll taxes 

and the taxation of benefits are credited to the budget’s 

OASI and DI trust funds. Any revenues not needed to 

pay for benefits or administrative expenses are invested in 

government bonds. The interest that the bonds earn (a 

total of $85 billion in 2003) is credited to the trust funds. 

But because that interest represents the government paying itself, it provides no net revenues to the government 

and has no effect on the total budget.7

The trust funds serve mainly as an accounting mechanism to track revenues and outlays for Social Security. 

The funds’ balance represents the total amount that the 

government is legally authorized to spend on Social Security. That balance provides only a limited perspective on 

the program’s finances, however, because it does not consider the interaction with other federal tax and spending 

programs. Although the Social Security system is authorized to spend certain amounts, the resources to finance 

those outlays derive from the budget as a whole—and 

ultimately from the economy.

Current-Law Projections 

of Social Security 

The Social Security system bridges many generations, 

which makes long-term forecasts valuable. Having longterm projections allows policymakers to determine what 

changes are needed well in advance of their implementation—which in turn gives workers more time to respond 

to any changes by adjusting their plans for saving and 

retirement. 

CBO has developed the capability to project various 

measures of Social Security’s finances far into the future, 

both under current law and under a variety of possible 

legislative changes to the program. CBO’s current-law 

projections of those measures for the next 100 years are 

described below. Projections of benefit levels and tax payments for different income and age groups are detailed in 

Chapter 2. An important feature for policymakers and 

program participants is the uncertainty inherent in those 

projections. By examining the history of the demographic 

and economic factors on which the analysis is based, 

CBO is able to quantify that uncertainty, as explained in 

Chapter 3.

3. In Social Security, the “normal retirement age” is the age at which 

a worker becomes eligible for full retirement benefits. It is 65 for 

people born in or before 1937 and higher for those born later, rising to 67 for people born after 1959. 

4. Economists generally agree that workers effectively pay the full tax 

because employers pass on their share to workers in the form of 

lower compensation.

5. For more information about the taxation of Social Security benefits, see Box 3-1 on page 24.

6. Some additional federal revenues from the taxation of Social Security benefits are allocated to Medicare’s Hospital Insurance Trust 

Fund, but that stream of revenues is not considered in this report.

7. See Congressional Budget Office, The Impact of Trust Fund Programs on Federal Budget Surpluses and Deficits, Long-Range Fiscal 

Policy Brief No. 5 (November 4, 2002).
CHAPTER ONE PROJECTIONS OF SOCIAL SECURITY’S FINANCES 3

Even under a wide range of assumptions, CBO’s projections point to a financial imbalance in the Social Security 

system over the long run. Changes in economic growth 

can affect the system’s finances. But because the initial 

benefits paid to new recipients are indexed to the overall 

growth of earnings, the effect of such changes is muted. 

For the most part, the future financial status of Social 

Security will be driven not by economic conditions but 

by long-term demographic shifts—most notably, the 

aging of the population. That trend is generally predictable, because anyone who will receive retirement benefits 

during the next 62 years has already been born.8

Annual Outlays and Revenues Relative to GDP

The measures that provide the fullest understanding of 

Social Security’s finances are projections of the program’s 

annual outlays (scheduled benefits plus administrative 

costs) and revenues (payroll taxes and the income taxes 

paid on benefits and credited to the OASDI trust funds). 

Because many Social Security projections are made over 

a long horizon and because the system’s finances are large 

compared with the size of the economy, it is useful to 

consider projected outlays and revenues not in dollars but 

relative to either economywide earnings or gross domestic 

product.

A common way to compare outlays and revenues with 

earnings is to present them relative to taxable payroll. 

Those measures are frequently referred to as the cost and 

income rates, respectively. An advantage of those measures is that they relate directly to a common policy lever, 

the OASDI payroll tax rate. A disadvantage is that the 

denominator, taxable payroll, can itself vary with policy 

changes, which makes it harder to clearly see the effects of 

legislative proposals on outlays and revenues. For example, a proposal to raise the taxable maximum or to cover 

those state and local employees who are not now covered 

by Social Security would increase the size of the taxable 

payroll. That increase could make changes in outlays or 

revenues as a share of taxable payroll appear smaller than 

they would appear using other measures.9

 In addition, 

focusing on taxable payroll and payroll taxes could limit 

the attention paid to other types of taxes. 

An alternative approach is to compare Social Security 

outlays and revenues with GDP, a more comprehensive 

measure of the nation’s economic resources. CBO typically presents various types of outlays and revenues relative to GDP in other projections, and the use of a common metric allows policymakers to more easily compare 

the costs of different programs. Therefore, this report 

mainly presents Social Security outlays and revenues relative to GDP, although it also includes measures relative to 

taxable payroll.

In 2003, Social Security outlays equaled 4.4 percent of 

GDP, and revenues equaled 5.0 percent (see Table 1-1). 

Under current law, revenues are projected to be fairly stable for the next 20 years and then to decline slightly each 

year relative to GDP as workers are assumed to take an 

increasing share of their compensation in the form of 

nontaxable benefits, such as health insurance and pensions. In 2100, revenues are projected to equal 4.8 percent of GDP.10

Although revenues will remain relatively stable as the 

baby-boom generation retires, outlays will rise dramatically. The growth relative to GDP will begin around 

2007 and then slowly accelerate, with annual outlays projected to exceed annual revenues by 2019 (see the dark 

lines in Figure 1-1). Although today the Social Security 

system as a whole contributes to reducing the total budget deficit, within the next several years that contribution 

will begin to decline. And starting in 2019, the Social 

Security system will either increase the size of the total 

deficit or reduce the size of the total surplus.11

The fastest growth in outlays as a share of GDP will occur 

from 2018 to 2023, CBO projects, when that share will 

increase at an average rate of 2.2 percent a year. By 2030, 

projected outlays will reach 6.1 percent of GDP—nearly 

40 percent higher than in 2003. In later years, as babyboom beneficiaries die, outlays relative to GDP will sta8. Of course, to make projections of Social Security’s finances, CBO 

must make assumptions about the rates at which people will die or 

become disabled, the level of immigration, and the rate at which 

earnings will grow (among other factors). Those assumptions are 

described in Chapter 3.

9. If revenues increased by more than outlays under such a proposal, 

outlays relative to taxable payroll would decline even as total outlays rose.

10. Interest credited to the trust funds is not included in that measure 

of annual revenues because such interest is an intragovernmental 

transaction.

11. For scenarios of total budget spending and revenues over the long 

term, see Congressional Budget Office, The Long-Term Budget 

Outlook (December 2003).
4 THE OUTLOOK FOR SOCIAL SECURITY

Table 1-1.

Social Security Outlays and Revenues in Selected Years, 2003 to 2100

(Percentage of GDP)

Source: Congressional Budget Office.

Note: Revenues consist of receipts from Social Security payroll taxes and from income taxes paid on Social Security benefits. Outlays comprise scheduled benefits and administrative costs. Annual outlays exceed annual revenues beginning in 2019; scheduled benefits cannot be paid starting in 2053. (Annual data through 2103 are available at CBO’s Web site, www.cbo.gov.)

a. The range within which there is an 80 percent probability that the actual value will fall (that is, the range between the 10th and 90th percentiles for each measure based on a distribution of 500 simulations from CBO’s long-term model). The balances shown do not equal the 

difference between the outlays and revenues shown because each value is obtained from a different simulation. For example, the scenario 

with the 90th percentile of outlays has higher outlays than 90 percent of all simulations, the scenario with the 90th percentile of revenues 

has higher revenues than 90 percent of the simulations, and the scenario with the 90th percentile of balances (revenues minus outlays) 

has higher balances than 90 percent of the simulations. Those will generally be three different simulations. 

bilize for about 15 years. But they will then resume their 

increase, albeit at a slower pace, as lifespans continue to 

lengthen. By 2100, CBO projects, scheduled outlays will 

equal 6.8 percent of GDP—56 percent higher than in 

2003, and 41 percent higher than projected revenues in 

2100.

Those projections depend on assumptions about a number of factors. Based on patterns of historical variation in 

those factors, there is a 10 percent chance that outlays 

will be less than 5.2 percent of GDP in 2030 and a 10 

percent chance that they will be greater than 7.0 percent 

of GDP that year. The range between those numbers is 

known as the 80 percent range of uncertainty, because 

there is an 80 percent chance that actual outlays will fall 

somewhere within that range. The uncertainty of the projections grows over time (see Figure 1-1). The 80 percent 

uncertainty range for outlays more than doubles between 

2030 and 2100, when it spans from 5.4 percent to 9.4 

percent of GDP. (Because of asymmetries in the structure 

of the Social Security system, the expected outcomes do 

not fall exactly in the middle of the uncertainty range.) 

In current-law projections, Social Security payroll taxes 

remain at 12.4 percent of taxable income, and taxable 

income is assumed to grow at about the same rate as 

GDP. Thus, there is comparatively little uncertainty 

about revenues relative to GDP—on average, the uncertainty range for projected outlays is about nine times as 

large as that for revenues.12

Another common way to look at Social Security’s annual 

finances is to consider the annual balance: the difference 

between outlays and revenues in a given year. As noted 

above, revenues exceeded outlays last year, resulting in a 

positive balance of 0.6 percent of GDP. In 2030, outlays 

will be much higher than revenues, resulting in a projected deficit of 1.0 percent of GDP. That gap is projected to grow to 2.0 percent of GDP in 2100. Because 

annual balances are small compared with outlays and revenues, they are more volatile: a small change in either 

outlays or revenues can lead to a large percentage change 

in the balance.

Actual

2003 2025 2050 2075 2100

Expected Outcome Under Current Law

Revenues 4.98 5.07 4.99 4.92 4.83

Outlays 4.36 5.71 6.25 6.62 6.82

Balance 0.62 -0.64 -1.27 -1.70 -1.99

80 Percent Range of Uncertaintya

Revenues 4.98 4.92 to 5.17 4.84 to 5.11 4.75 to 5.03 4.69 to 5.00

Outlays 4.36 5.08 to 6.55 4.93 to 7.51 5.20 to 8.48 5.41 to 9.43

Balance 0.62 -1.47 to -0.12 -2.75 to -0.07 -3.78 to -0.44 -4.65 to -0.77

12. CBO’s uncertainty analysis does not account for uncertainty 

about the relationship between taxable income and GDP.
CHAPTER ONE PROJECTIONS OF SOCIAL SECURITY’S FINANCES 5

Figure 1-1.

Projected Social Security Outlays and Revenues Under Current Law,

1985 to 2103

(Percentage of GDP)

Source: Congressional Budget Office.

Note: The dark lines indicate CBO’s projections of expected outcomes. In those projections, annual Social Security outlays exceed revenues 

starting in 2019, and scheduled benefits cannot be paid beginning in 2053. Shaded areas indicate the 80 percent range of uncertainty 

around each projection. (In other words, there is a 10 percent chance that actual values will be above that range, a 10 percent chance 

that they will be below it, and an 80 percent chance that they will fall within the range. Those uncertainty ranges are based on a distribution of 500 simulations from CBO’s long-term model.)

a. Scheduled benefits and administrative costs.

b. Payroll taxes and revenues from the taxation of benefits.

The OASI and DI programs are legally distinct, with separate dedicated payroll taxes and trust funds, but from an 

economic and policy perspective, they are generally 

treated as a single program. Older workers are more likely 

to become disabled than younger workers, so an older 

population results in both higher disability outlays and 

higher retirement outlays. But after DI beneficiaries reach 

the normal retirement age, their benefits are paid from 

the OASI trust fund. Therefore, the aging of the population will not affect outlays for disability benefits as much 

as outlays for retirement benefits. OASI outlays are projected to grow by 61 percent (from 3.7 percent of GDP 

to 5.9 percent) between 2003 and 2100, whereas DI outlays are projected to grow by 31 percent (from 0.7 percent of GDP to 0.9 percent).

Summarized Outlays and Revenues Relative to GDP

Long-term projections of annual outlays and revenues 

provide a comprehensive summary of the overall scope 

and timing of the economic and budgetary implications 

of the Social Security program under current law. For 

narrower purposes, analysts frequently summarize the 

1985 1995 2005 2015 2035 2025 2045 2055 2065 2075 2095 2085

0

4

3

5

6

7

8

9

10

Actual Projected

Outlaysa

Revenuesb
6 THE OUTLOOK FOR SOCIAL SECURITY

program’s outlay and revenue data in a single number for 

a given time period (for example, total outlays over 75 

years). Summarized values can be expressed as a percentage of either GDP or taxable payroll over the same 

period. 

Summarizing outlays or revenues by taking a simple average of projected values would be misleading, because it 

would not take into account the fact that, even after 

adjustment for inflation, a dollar today is more valuable 

than a dollar in the future. Thus, the data are summarized by computing the present value of outlays or revenues for a given period and dividing that figure by the 

present value of the stream of GDP or taxable payroll. 

Calculating the summarized measures typically involves 

making two other adjustments as well. First, the current 

trust fund balance is added to summarized revenues to 

reflect Social Security’s financial history (incorporating 

the net effect of past annual Social Security surpluses and 

deficits). Second, an additional year’s worth of projected 

outlays is added to summarized outlays to reflect the goal 

of having a “cushion” in the trust funds at the end of the 

time period being considered.

CBO projects Social Security’s summarized outlays over 

100 years at 5.8 percent of GDP and summarized revenues at 5.2 percent, resulting in a summarized deficit of 

0.5 percent of GDP (see Table 1-2). CBO’s analysis can 

also calculate the range of uncertainty around those projections. The probability is more than 95 percent that, 

under current law, total outlays over 100 years will exceed 

total revenues (that is, the summarized balance will be 

less than zero), CBO projects. In addition, the 100-year 

summarized deficit could be much greater than 0.5 percent of GDP; there is a 10 percent chance that it will 

exceed 1.1 percent of GDP.

The 100-year summarized deficit can be interpreted as 

indicating that if annual Social Security revenues were 

permanently increased, or annual outlays decreased, by 

0.5 percent of GDP beginning immediately, trust fund 

balances would be sufficient to provide spending authority for all of the benefits scheduled to be paid over the 

next 100 years. If either of those changes—or their equivalent—was made, projected trust fund balances would 

remain positive over that period. And at the end of the 

100 years, the balance would be large enough to authorize paying one year’s worth of benefits.

As noted earlier, however, positive trust fund balances 

indicate the legal authority to pay benefits but not the 

budgetary resources to do so. Thus, they do not give as 

full a picture of the financial situation as annual outlays 

and revenues do. A limitation of simply targeting the 

summarized balance is that such an approach would not 

necessarily provide solvency to the Social Security system 

over the long term. Because outlays are projected to rise 

over time, a policy that increased revenues by 0.5 percent 

of GDP every year would still result in annual Social 

Security deficits beginning in 2024 and would only modestly reduce them in the long run. For example, the 

annual deficit under current law is projected to equal 

1.3 percent of GDP in 2050 and 2.0 percent of GDP in 

2100, so boosting revenues by 0.5 percent of GDP would 

still leave large deficits in those years. 

As a share of taxable payroll, the summarized 100-year 

deficit equals 1.4 percent, CBO projects (see Table 1-2). 

The Social Security trustees commonly summarize the 

system’s deficit relative to taxable payroll over 75 years. 

CBO projects a 75-year summarized deficit of 1.00 percent of taxable payroll.13

Trust Fund Ratios

Another common measure of Social Security’s finances is 

the ratio of the trust fund balance to annual outlays, 

which indicates how many years’ worth of benefits could 

be funded with a given balance. The trust fund balance 

summarizes the entire accounting history of the Social 

Security program in a single number, because it equals 

the present value of all past revenues minus the present 

value of all past outlays. As noted above, it is also important from a policy perspective, because legal spending au13. The trustees project a 75-year summarized deficit of 1.89 percent 

of taxable payroll; see Social Security Administration, The 2004 

Annual Report of the Board of Trustees of the Federal Old-Age and 

Survivors Insurance and Disability Insurance Trust Funds (March 

23, 2004), p. 13. The difference between that number and CBO’s 

projection results from different economic assumptions and methods of analysis. For example, a small difference in the assumed 

long-term real interest rate (which is used as the discount rate in 

calculations of present value) accounts for one-fifth of the difference between the two estimates. For more details, see Appendix A 

of this study.
CHAPTER ONE PROJECTIONS OF SOCIAL SECURITY’S FINANCES 7

Table 1-2.

Summarized Social Security Outlays, 

Revenues, and Balances

Source: Congressional Budget Office.

Note: Summarized outlays and revenues are the present value of 

annual outlays and revenues over the relevant time period 

divided by the present value of GDP or taxable payroll over 

that period. The balance is the present value of revenues 

minus the present value of outlays, divided by the present 

value of GDP or taxable payroll over that period. 

a. The range within which there is an 80 percent probability that 

the actual value will fall (that is, the range between the 10th and 

90th percentiles for each measure based on a distribution of 

500 simulations from CBO’s long-term model). The balances 

shown do not equal the difference between the outlays and revenues shown because each value is obtained from a different 

simulation.

thority is limited to the balance of the trust funds. However, trust fund holdings, which are invested in Treasury 

bonds, are liabilities to the rest of the government (which 

will need to pay for the bonds when they are redeemed). 

Thus, such holdings are not assets of the government as a 

whole.

The 2004 trust fund ratio—the balance at the beginning 

of the year divided by projected outlays for the year—

equals 3.04, CBO estimates. That ratio is projected to 

rise to 4.46 in 2019 and then decline quickly (see Figure 

1-2).

The expected trust fund exhaustion date—the year in 

which the trust fund balance (and thus the trust fund 

ratio) falls to zero—is 2052 in CBO’s projection. But as 

the uncertainty range in Figure 1-2 shows, there is a 10 

percent chance that the exhaustion date will be 2034 or 

earlier and a 10 percent chance that it will be after 2085. 

Although the figure shows negative trust fund ratios after 

the exhaustion date, under current law the trust funds 

cannot be negative because the Social Security program 

does not have the legal authority to borrow money. Thus, 

those negative balances represent the cumulative amount 

that the federal government’s general fund would have to 

provide to pay all scheduled Social Security benefits.

Alternative Measures of Outlays

It is unclear how to describe future benefit levels in the 

unlikely case that no changes are made to current law 

and the trust funds are exhausted. On the one hand, the 

exhaustion of the trust funds would not affect a beneficiary’s legal right to full benefits. On the other hand, the 

Social Security Administration would not have the legal 

authority to pay full benefits.14

Consequently, this analysis presents future benefit spending under two scenarios. In the “scheduled benefits” scenario, outlays after the trust funds are exhausted are 

assumed to include the full benefits owed, despite any 

shortfall in the system’s annual revenues. Alternatively, in 

the “trust-fund-financed benefits” scenario, outlays are

Revenues Outlays Balance

As a Percentage of GDP

Expected Outcome 

Under Current Law

50 Years 

(2004-2053) 5.39 5.50 -0.10

100 Years 

(2004-2103) 5.24 5.79 -0.54

80 Percent Range 

of Uncertaintya

50 Years 

(2004-2053) 5.27 to 5.45 5.02 to 5.96 -0.61 to 0.28

100 Years 

(2004-2103) 5.14 to 5.32 5.31 to 6.28 -1.07 to -0.17

As a Percentage of Social Security Taxable Payroll

Expected Outcome 

Under Current Law

50 Years 

(2004-2053) 14.02 14.29 -0.27

100 Years 

(2004-2103) 13.85 15.29 -1.44

80 Percent Range 

of Uncertaintya

50 Years 

(2004-2053) 13.78 to 14.21 13.09 to 15.56 -1.58 to 0.72

100 Years 

(2004-2103) 13.70 to 14.13 14.41 to 17.36 -2.46 to -0.08

14. See the memorandum from Thomas J. Nicola, Legislative Law 

Attorney, Congressional Research Service, to the House Committee on the Budget, “Whether Entitlement to Full Social Security 

Benefits Depends on Solvency of the Social Security Trust Funds 

If Congress Does Not Change the Law,” November 20, 1998.
8 THE OUTLOOK FOR SOCIAL SECURITY

Figure 1-2.

The OASDI Trust Fund Ratio, 1985 to 2103

Source: Congressional Budget Office.

Notes: The trust fund ratio is the ratio of the total trust fund balance at the beginning of a calendar year to total Social Security outlays in that 

year. The dark line indicates CBO’s projection of expected outcomes; the shaded area indicates the 80 percent range of uncertainty 

(based on a distribution of 500 simulations from CBO’s long-term model).

OASDI = Old-Age, Survivors, and Disability Insurance.

assumed to include only those benefits that could be 

financed by annual revenues. Thus, that scenario assumes 

that all benefits are reduced annually once the trust funds 

are exhausted so that total outlays equal available revenues.

Trust-fund-financed benefits equal scheduled benefits 

until the trust funds are exhausted (projected to occur in 

2052) and Social Security revenues thereafter. In 2053, 

dedicated revenues are projected to equal only 81 percent 

of scheduled outlays, so trust-fund-financed benefits are 

19 percent lower than scheduled benefits (see Figure 1-3). 

The difference grows: by 2100, projected revenues are 

only 71 percent of projected outlays. 

That computation of trust-fund-financed benefits implies 

a lower level of total annual outlays beginning in 2053. 

However, even before that, dedicated Social Security revenues will not fully pay for scheduled benefits. Although 

today those revenues exceed annual outlays, beginning in 

2019 they will fall short of outlays. At that point, from a 

trust fund perspective, some revenues will come from 

interest earnings on Treasury bonds held by the trust 

funds (and, beginning in 2033, from redemption of those 

bonds). In effect, cash will be transferred from the government’s general fund to Social Security—just as it 

would be after the trust funds are exhausted in the scheduled-benefits scenario. To generate the real financial 

resources to support those transfers, the government will 

have to either run a surplus in the rest of the budget or 

borrow from the public. 

Actual Projected

1985 1995 2005 2015 2025 2035 2045 2055 2065 2075 2085 2095

-15

-10

-5

0

5

10
CHAPTER ONE PROJECTIONS OF SOCIAL SECURITY’S FINANCES 9

Figure 1-3.

Outlays for Benefits Under Current Law and Under Projections of Trust Fund

Balances, 1985 to 2103

(Percentage of GDP)

Source: Congressional Budget Office.

Note: Trust-fund-financed benefits (those financed by legal spending authority) are projected to fall below scheduled benefits in 2053, when 

the trust funds have been exhausted. After that, trust-fund-financed benefits equal annual Social Security revenues.

1985 1995 2005 2015 2025 2035 2045 2055 2065 2075 2085 2095

0

3

4

5

6

7

Total Benefits That Could

Be Financed from Projected

Trust Fund Balances

Total Benefits

Scheduled to Be Paid

Under Current Law

Actual Projected

2

Projections of Benefit Levels for

Different Age and Income Groups

An important aspect of the economic impact and 

policy design of the Social Security program is its effects 

on individuals, both as taxpayers and as beneficiaries. 

This chapter presents various measures of the benefits 

received and taxes paid by program participants, categorized by the decade of their birth and their earnings level.

Social Security is designed both to ensure a minimum 

level of benefits to even the poorest recipients (the “adequacy” goal) and to distribute benefits so that workers 

who have paid more Social Security taxes receive more 

benefits (the “equity” goal). The program’s progressive 

benefit structure reflects those two objectives. Retired 

workers with a history of low earnings (wages and selfemployment income) receive annual benefits that replace 

a higher percentage of their preretirement earnings than 

other retired workers do. Nonetheless, workers with 

higher earnings receive a higher level of annual benefits. 

As discussed in the previous chapter, there are two concepts for projecting benefits. “Scheduled” benefits are 

those specified in current law. However, once the trust 

funds are exhausted, Social Security will not have sufficient spending authority to pay scheduled benefits. Thus, 

for illustrative purposes, the Congressional Budget Office 

also computes “trust-fund-financed” benefits, under the 

assumption that after the trust funds are exhausted, all 

types of benefits are cut annually, by an equal percentage, 

so that total outlays equal available revenues. (If federal 

officials decided to implement the benefit cuts differently, 

the effects on individual benefit levels could differ from 

those shown here.) Under current law, those reductions 

would begin in 2053, CBO projects, so anyone who was 

collecting benefits in that year or later would experience a 

cut from the level of scheduled benefits. 

Many different ways to measure benefit levels exist, each 

of which offers a different perspective on Social Security’s 

impact on participants. This report considers six measures. The first three present only benefits received by 

retired workers: first-year retirement benefits in real 

(inflation-adjusted) dollars, the first-year replacement 

rate (the percentage of preretirement earnings replaced by 

retirement benefits), and lifetime retirement benefits in 

real dollars.1 The other three measures apply to all participants in the Social Security program and thus are more 

comprehensive: total payroll taxes paid over an individual’s lifetime, total Social Security benefits received over a 

lifetime, and the ratio of lifetime benefits to lifetime payroll taxes. To gauge the effect that benefits have on the 

resources available to recipients, all six measures compute 

benefits net of the income taxes paid on those benefits 

and credited to the Social Security trust funds.2

First-Year Retirement Benefits

The initial level of benefits that a retired worker receives 

(in real dollars) measures his or her purchasing power.3 A 

CHAPTER

1. For a discussion of those measures, see Congressional Budget 

Office, Measuring Changes to Social Security Benefits, Long-Range 

Fiscal Policy Brief No. 11 (December 2003).

2. As noted in Chapter 1, some revenues from the taxation of Social 

Security benefits are allocated to Medicare’s Hospital Insurance 

Trust Fund.

3. That level depends in part on when the retiree decides to claim 

benefits—the later the claiming age, the higher the benefits. Thus, 

changes in claiming age over time would result in apparent 

changes in benefit levels. To ensure that the data are comparable 

over time, this study considers a hypothetical benefit amount: the 

median benefit that workers would receive if everyone claimed 

benefits at age 65.
12 THE OUTLOOK FOR SOCIAL SECURITY

worker’s scheduled benefit level depends both on the program’s benefit structure, which is specified by Social Security law, and on the worker’s earnings history. On the one 

hand, growth in average earnings will generally cause 

scheduled benefits to increase over time. On the other 

hand, the normal retirement age is rising under current 

law—from 65 for people born in 1937 and earlier to 67 

for those born after 1959. That rise is effectively equivalent to a benefit reduction for those later cohorts, because 

benefits will be lower at any given age, regardless of when 

beneficiaries choose to begin claiming them. However, 

the effects of increased earnings are projected to more 

than offset that reduction, so on net, scheduled benefits 

are likely to continue growing. For example, in the scheduled-benefits scenario, CBO projects that people born in 

the 1990s—who will probably retire in the 2050s and 

2060s—will receive median benefits of $21,500 (in 2004 

dollars), compared with $13,300 for those born in the 

1940s, who are retiring today (see Figure 2-1 and the first 

column of Table 2-1). 

Trust-fund-financed benefits are projected to fall by 

nearly 20 percent in the year the trust funds are exhausted 

but then resume their increase as earnings grow. Even 

with that drop, future retirees would earn higher real 

median benefits than today’s retirees. Those born in the 

1990s would receive median first-year benefits of 

$16,700 (in 2004 dollars), still higher than the $13,300 

received by people born in the 1940s (see Figure 2-1 and 

the second column of Table 2-1).4

First-Year Replacement Rates

A different perspective on benefit levels is given by the 

replacement rate—the ratio of first-year benefits to average career earnings.5 People generally want to avoid dramatic changes in their standard of living when they retire, 

so many retirement and pension programs are designed

Figure 2-1.

Median First-Year Retirement Benefits, 

by Birth Cohort

(2004 dollars)

Source: Congressional Budget Office.

Notes: First-year benefits are projected assuming that all workers 

claim benefits at age 65. Values are net of income taxes paid 

on benefits and credited to the Social Security trust funds. 

In CBO’s projection, trust-fund-financed benefits fall below 

scheduled benefits beginning in 2053, when the trust funds 

are exhausted. Trust-fund-financed benefits are projected by 

assuming an across-the-board cut in benefits each year such 

that total annual benefits are limited to total annual revenues.

to link retirement benefits to the level of preretirement 

income.6 Social Security links benefit levels to preretirement income by basing first-year benefits on a worker’s 

average level of earnings over a lifetime. However, just 

as the scheduled increase in the normal retirement age 

reduces benefits at any given age, it also lowers the 

replacement rate for future retirees compared with the 

rate for people retiring now. If benefits are paid as scheduled, the median replacement rate for retirees born in the 

1990s will be 4 percentage points lower than the rate for 

retirees born in the 1940s (see the third column in Table 

2-1). In the case of trust-fund-financed benefits, the 

replacement rate will drop dramatically after the trust

4. Benefit levels under both scenarios, broken down by sex as well as 

by cohort and lifetime household earnings level, are shown in 

Table B-1 in Appendix B.

5. In that calculation, average career earnings refers to the average of 

a worker’s highest 35 years of covered earnings, indexed to compensate both for past inflation and for real growth in average earnings nationwide. (Covered earnings may be higher than taxable 

earnings because they include all earnings, including amounts 

above the taxable maximum.)

6. See Congressional Budget Office, Baby Boomers’ Retirement Prospects: An Overview (November 2003). 

1940 1950 1960 1970 1980 1990 2000

0

5,000

10,000

15,000

20,000

25,000

Trust-Fund-Financed

First-Year Benefits

Scheduled

First-Year Benefits

10-Year Birth Cohort Beginning in Specified Year
CHAPTER TWO PROJECTIONS OF BENEFIT LEVELS FOR DIFFERENT AGE AND INCOME GROUPS 13

Figure 2-2.

Median Replacement Rates, 

by Birth Cohort

(Percent)

Source: Congressional Budget Office.

Notes: Replacement rates are first-year retirement benefits (net of 

income taxes paid on benefits and credited to the Social 

Security trust funds) as a percentage of average career earnings. 

In CBO’s projection, trust-fund-financed benefits fall below 

scheduled benefits beginning in 2053, when the trust funds 

are exhausted. Trust-fund-financed benefits are projected by 

assuming an across-the-board cut in benefits each year such 

that total annual benefits are limited to total annual revenues.

funds are exhausted (see Figure 2-2). In that scenario, the 

median replacement rate for retirees born in the 1990s 

will be 13 percentage points lower than the rate for those 

born in the 1940s.

The progressivity of Social Security’s benefit formula 

means that replacement rates are higher for workers with 

lower earnings. For example, among workers born in the 

1940s, the median worker in the lowest one-fifth (quintile) of the earnings distribution will have more than 70 

percent of his or her preretirement earnings replaced by 

Social Security. The median worker in the highest earnings quintile for that age group, by contrast, will have less 

than 30 percent of his or her earnings replaced.

Lifetime Retirement Benefits

Another way to measure the income that retirees receive 

from Social Security is to look at lifetime retirement benefits—the present value of all of the benefits that a worker 

gets from the program during retirement. That measure 

represents the amount of money that, if invested in Treasury securities, would pay retirement benefits over a person’s lifetime. 

The trend in lifetime retirement benefits (shown in Figure 2-3) differs from the trend in first-year benefits 

(shown in Figure 2-1). Two factors explain that difference. First, as life expectancy increases, retirees will collect 

benefits for a longer period, and scheduled lifetime beneFigure 2-3.

Median Lifetime Retirement Benefits, 

by Birth Cohort

(Present value in 2004 dollars)

Source: Congressional Budget Office.

Notes: Lifetime retirement benefits have been adjusted for inflation 

(to put them in constant dollars) and discounted to age 60. 

Values are net of income taxes paid on benefits and credited 

to the Social Security trust funds. 

In CBO’s projection, trust-fund-financed benefits fall below 

scheduled benefits beginning in 2053, when the trust funds 

are exhausted. Trust-fund-financed benefits are projected by 

assuming an across-the-board cut in benefits each year such 

that total annual benefits are limited to total annual revenues.

1940 1950 1960 1970 1980 1990 2000

0

5

10

15

20

25

30

35

40

45

50

Replacement Rate with

Scheduled Benefits

Replacement Rate with

Trust-Fund-Financed

Benefits

10-Year Birth Cohort Beginning in Specified Year

1940 1950 1960 1970 1980 1990 2000

0

50,000

100,000

150,000

200,000

250,000

300,000

Scheduled

Lifetime Benefits

Trust-Fund-Financed

Lifetime Benefits

10-Year Birth Cohort Beginning in Specified Year
14 THE OUTLOOK FOR SOCIAL SECURITY

Table 2-1.

Measures of the Benefits Received by the Median Retired Worker, 

by Birth Cohort and Earnings Level

Continued

fits will rise faster than scheduled first-year benefits. For 

example, median scheduled lifetime benefits are projected 

to be 86 percent higher for retirees born in the 1990s 

than for those born in the 1940s ($223,500 versus 

$120,400, in 2004 dollars), whereas scheduled first-year 

benefits are projected to be 62 percent higher ($21,500 

compared with $13,300).

Second, cohorts who retire before the trust funds are 

exhausted will collect the full amount of their scheduled 

first-year benefits, but some will still be receiving benefits 

when the trust funds become exhausted. As a result, their 

trust-fund-financed lifetime benefits will be lower than 

scheduled lifetime benefits (see the last two columns of 

Table 2-1). However, even trust-fund-financed lifetime 

benefits will increase for every cohort. For example, retirees born in the 1990s are projected to receive median 

trust-fund-financed lifetime benefits of $167,900, compared with $120,400 for those born in the 1940s.

10-Year Birth 

Cohort Beginning 

in Specified Year

First-Year Benefits

(2004 dollars)

First-Year Replacement

Rate (Percent)a

Present Value of Lifetime

Benefits (2004 dollars)b

Scheduled

Trust-FundFinanced ScheduledTrust-FundFinanced ScheduledTrust-FundFinanced 

Median

1940 13,300 13,300 44.5 44.5 120,400 120,400

1950 14,000 14,000 44.1 44.1 130,400 130,300

1960 14,300 14,300 41.9 41.9 139,800 138,600

1970 16,400 16,400 41.3 41.3 165,100 156,500

1980 19,000 18,300 40.8 39.4 193,700 162,500

1990 21,500 16,700 40.6 31.6 223,500 167,900

2000 24,300 18,300 40.7 30.6 258,300 186,300

Median in Lowest Household Earnings Quintile

1940 7,400 7,400 72.7 72.7 60,200 60,200

1950 8,200 8,200 69.4 69.4 66,200 66,100

1960 8,500 8,500 65.2 65.2 71,100 70,800

1970 9,500 9,500 65.8 65.8 78,600 76,900

1980 10,200 9,800 69.9 66.3 85,100 73,700

1990 11,500 9,000 70.8 54.7 100,000 75,000

2000 13,000 9,800 69.7 52.2 119,100 87,200

Median in Middle Household Earnings Quintile

1940 14,900 14,900 42.9 42.9 138,800 138,800

1950 15,300 15,300 43.0 43.0 148,200 148,100

1960 15,500 15,500 41.0 41.0 160,800 159,500

1970 17,700 17,700 40.5 40.5 187,100 178,400

1980 20,500 19,700 39.8 38.7 223,500 187,200

1990 23,300 18,100 39.5 30.8 264,200 199,800

2000 26,400 19,900 39.6 29.8 302,500 217,300
CHAPTER TWO PROJECTIONS OF BENEFIT LEVELS FOR DIFFERENT AGE AND INCOME GROUPS 15

Table 2-1.

Continued

Source: Congressional Budget Office.

Notes: All values are net of income taxes paid on benefits and credited to the Social Security trust funds. First-year benefits and replacement 

rates are simulated as if all workers claimed benefits at age 65. In the trust-fund-financed measures, all beneficiaries are subject to an 

across-the-board cut in benefits each year so that total annual benefits equal total annual revenues once the trust funds have been 

exhausted.

The overall median values differ from the median values in the middle quintile because individuals are sorted into quintiles on the 

basis of household earnings, not benefit levels.

a. First-year benefits as a percentage of average career earnings.

b. The present value of all retired-worker benefits received.

Total Lifetime Payroll Taxes 

and OASDI Benefits

For simplicity, the three measures discussed above include 

only retirement benefits. A more comprehensive perspective comes from considering the present value of total 

Social Security payroll taxes paid over a lifetime and the 

present value of total Social Security benefits—Disability 

Insurance payments as well as Old-Age and Survivors 

Insurance payments—received by individuals over a lifetime.

Beneficiaries prefer higher benefits, of course, but they 

also prefer more certainty. When projections of benefits 

are being considered, both the level of and the uncertainty about those benefits are important. Uncertainty 

carries a real economic cost because it increases the 

chance that workers will prepare for the future inappropriately. As a basis for understanding how legislative proposals affect uncertainty, this report presents ranges of 

uncertainty for lifetime measures of taxes and benefits.

Figure 2-4 shows the 80 percent range of uncertainty for 

the projected lifetime payroll taxes that individuals will 

pay under current law, broken down by 10-year birth 

cohort and quintile of lifetime household earnings. Those 

taxes comprise all Social Security payroll taxes levied on 

individual earnings (both the employer and employee 

shares). Individual lifetime earnings depend on the 

annual level and number of years of earnings.7 Not surprisingly, total taxes are higher for people with greater 

earnings. The uncertainty range of CBO’s projections for 

those people is larger as well. In addition, as earnings 

increase for later cohorts, real lifetime payroll taxes also 

increase.

Figure 2-5 presents equivalent projections for average lifetime benefits, which comprise all benefits received by 

individuals within a birth cohort (including retired10-Year Birth 

Cohort Beginning 

in Specified Year

First-Year Benefits

(2004 dollars)

First-Year Replacement

Rate (Percent)a

Present Value of Lifetime

Benefits (2004 dollars)b

Scheduled

Trust-FundFinanced ScheduledTrust-FundFinanced ScheduledTrust-FundFinanced 

Median in Highest Household Earnings Quintile

1940 19,900 19,900 28.5 28.5 209,200 209,200

1950 21,600 21,600 27.8 27.8 235,200 235,200

1960 22,400 22,400 26.3 26.3 250,000 248,300

1970 25,200 25,200 25.4 25.3 295,900 279,100

1980 29,500 28,400 22.9 22.0 352,200 293,800

1990 33,200 25,900 22.6 17.6 407,400 306,200

2000 37,600 28,400 22.8 17.2 465,800 339,800

7. Low lifetime earnings may reflect low annual earnings or a low 

number of years of paid work. For example, about 20 percent of 

people with low lifetime household earnings worked 10 or fewer 

years during their careers.
16 THE OUTLOOK FOR SOCIAL SECURITY

Figure 2-4.

Potential Range of Lifetime Payroll Taxes, by Birth Cohort and Earnings Level

(2004 dollars)

Source: Congressional Budget Office.

Note: Each pair of lines indicates the boundaries of the 80 percent range of uncertainty for projected lifetime payroll taxes (adjusted for 

inflation and discounted to age 60). Those results are based on 500 simulations from CBO’s long-term model, including only simulated 

individuals who live to at least age 45. Taxes include both the employer and employee shares of Social Security payroll taxes.

1940 1950 1960 1970 1980 1990 2000

0

50,000

100,000

150,000

200,000

250,000

1940 1950 1960 1970 1980 1990 2000

0

50,000

100,000

150,000

200,000

250,000

1940 1950 1960 1970 1980 1990 2000

0

50,000

100,000

150,000

200,000

250,000

Lowest Quintile of Lifetime Household Earners

Middle Quintile of Lifetime Household Earners

Highest Quintile of Lifetime Household Earners

10-Year Birth Cohort Beginning in Specified Year
CHAPTER TWO PROJECTIONS OF BENEFIT LEVELS FOR DIFFERENT AGE AND INCOME GROUPS 17

Figure 2-5.

Potential Range of Lifetime OASDI Benefits, by Birth Cohort and Earnings Level

(2004 dollars)

Source: Congressional Budget Office.

Notes: Each pair of lines indicates the boundaries of the 80 percent range of uncertainty for projected lifetime OASDI benefits (including 

retired-worker, disabled-worker, spousal, and survivor benefits) net of income taxes paid on benefits and credited to the Social Security trust funds. The results are based on 500 simulations from CBO’s long-term model, including only simulated individuals who live 

to at least age 45. Values are adjusted for inflation and discounted to age 60.

In CBO’s projections, trust-fund-financed benefits fall below scheduled benefits beginning in 2053, when the trust funds are 

exhausted. Trust-fund-financed benefits are projected by assuming an across-the-board cut in benefits each year such that total

annual benefits are limited to total annual revenues.

OASDI = Old-Age, Survivors, and Disability Insurance.

1940 1950 1960 1970 1980 1990 2000

0

50,000

100,000

150,000

200,000

250,000

1940 1950 1960 1970 1980 1990 2000

0

50,000

100,000

150,000

200,000

250,000

1940 1950 1960 1970 1980 1990 2000

0

50,000

100,000

150,000

200,000

250,000

Lowest Quintile of Lifetime Household Earners

Middle Quintile of Lifetime Household Earners

Highest Quintile of Lifetime Household Earners

= Scheduled Lifetime Benefits

= Trust-Fund-Financed Lifetime Benefits

10-Year Birth Cohort Beginning in Specified Year
18 THE OUTLOOK FOR SOCIAL SECURITY

worker, disabled-worker, spousal, and survivor benefits) 

minus income taxes paid on those benefits and credited 

to the Social Security trust funds. Individual lifetime benefits depend on the age at which people first claim benefits, their marital history, and how long they live. Those 

benefits also depend on earnings—people with low lifetime household earnings have lower lifetime benefits than 

people with higher earnings. Figure 2-5 shows lifetime 

benefits under the scenarios for both scheduled and trustfund-financed benefits. Although trust-fund-financed 

benefits are lower than scheduled benefits, they still 

increase over time. 

Finally, Figure 2-6 presents the ratio of those two measures: the present value of total net benefits received over 

a lifetime divided by the present value of total payroll 

taxes paid over a lifetime. For example, a benefit-to-tax 

ratio of 150 percent means that benefits are 50 percent 

greater than taxes. The dotted lines in Figure 2-6 show 

the ratio of scheduled benefits to payroll taxes. That ratio 

is fairly stable for average and high earners but grows for 

the lowest quintile in later years. (For the early cohorts, 

the lifetime benefit-to-tax ratio falls as the normal retirement age rises.) However, scheduled taxes are not sufficient to pay for scheduled benefits, so those ratios may be 

unrealistically high. 

An alternative that accounts for the imbalance between 

projected Social Security revenues and outlays is the ratio 

of trust-fund-financed benefits to payroll taxes, shown 

with solid lines in Figure 2-6. Because trust-fundfinanced benefits decline after the trust funds are 

exhausted, that ratio also declines in later years.

In Social Security, as in any pay-as-you-go social insurance system, earlier generations of participants received 

very high benefits relative to the taxes they paid. As a 

result of that windfall, later generations will receive total 

benefits that are lower, on average, than the total taxes 

they paid. That low benefit-to-tax ratio is not an indication of inefficiency in the system; it merely reflects a 

transfer from current and future beneficiaries to earlier 

generations.

The benefit-to-tax ratio is higher for workers with lower 

lifetime earnings than for those with higher earnings. 

That outcome results in part from Social Security’s progressive benefit formula. Low lifetime earners are also 

more likely to include recipients of disabled-worker, 

spousal, or survivor benefits—who receive benefits in 

excess of the payroll taxes they pay, reflecting the insurance nature of the Social Security system. (The effect of 

disabled-worker benefits on the benefit-to-tax ratio can 

be seen by examining ratios for DI and OASI workers 

separately. Figures showing that information are available 

at CBO’s Web site, www.cbo.gov.)

Conclusions

Those different measures of the benefits received and 

taxes paid, broken down by age and income group, lead 

to different insights about the impact of Social Security 

under current law. 

B High earners receive higher benefits than low earners 

do, and future generations will receive larger benefits 

than current beneficiaries do, even after adjustment 

for inflation and even if benefits cannot be paid as 

scheduled once the trust funds are exhausted.

B Conversely, low earners have a larger percentage of 

their earnings replaced by Social Security than high 

earners do, and current beneficiaries have a larger percentage of their earnings replaced than future generations will.

B Future beneficiaries will not only receive higher 

annual benefits than today’s beneficiaries but will live 

longer, on average; thus, they will receive greater total 

benefits over their lifetime.

B The payroll tax is a constant percentage of taxable 

earnings, which means that because taxable earnings 

are projected to rise over time (even after adjustment 

for inflation), future generations will pay higher taxes.

B For workers with low lifetime household earnings, 

total Social Security benefits received over a lifetime 

are higher, on average, than dedicated taxes paid over a 

lifetime. For workers with average and above-average 

earnings, the reverse is true. If benefits were reduced 

across the board because of the projected shortfall in 

revenues, the general pattern of taxes paid relative to 

benefits received would remain similar for each 

income group.
CHAPTER TWO PROJECTIONS OF BENEFIT LEVELS FOR DIFFERENT AGE AND INCOME GROUPS 19

Figure 2-6.

Potential Range of the Ratio of Lifetime OASDI Benefits to Lifetime Payroll Taxes, 

by Birth Cohort and Earnings Level

(Percent)

Source: Congressional Budget Office.

Notes: Each pair of lines indicates the boundaries of the 80 percent range of uncertainty for projected ratios of lifetime payroll taxes (as 

shown in Figure 2-4) to lifetime OASDI benefits (as shown in Figure 2-5). Those results are based on 500 simulations from CBO’s longterm model, including only simulated individuals who live to at least age 45.

In CBO’s projections, trust-fund-financed benefits fall below scheduled benefits beginning in 2053, when the trust funds are 

exhausted. Trust-fund-financed benefits are projected by assuming an across-the-board cut in benefits each year such that total

annual benefits are limited to total annual revenues.

OASDI = Old-Age, Survivors, and Disability Insurance.

1940 1950 1960 1970 1980 1990 2000

0

50

100

150

200

250

300

Lowest Quintile of Lifetime Household Earners

1940 1950 1960 1970 1980 1990 2000

0

50

100

150

200

250

300

Middle Quintile of Lifetime Household Earners

1940 1950 1960 1970 1980 1990 2000

0

50

100

150

200

250

300

Highest Quintile of Lifetime Household Earners

= Ratio with Scheduled Benefits

= Ratio with Trust-Fund-Financed Benefits

10-Year Birth Cohort Beginning in Specified Year

3

Assumptions and Methods Used in This Analysis

Uncertainty about future Social Security taxes and 

benefits is an important economic consideration for beneficiaries and policymakers. This chapter describes the 

methods that the Congressional Budget Office uses to 

produce long-term projections for Social Security and the 

demographic, economic, and disability assumptions 

underlying those projections. It also discusses how CBO 

creates probability distributions that illustrate the uncertainty of the projections.

CBO’s Approach to Making 

Social Security Projections

CBO’s projections rely on simulations of a representative 

sample of Social Security participants.1 All of the components of the simulations are based on the actual experience of workers and beneficiaries, as measured in survey 

data and data from the Social Security program. In 

CBO’s modeling, a simulated individual is born in the 

United States (as either a boy or a girl) or immigrates to 

the United States at a certain age; obtains a particular 

level of education; may marry a specific person in the 

sample, divorce, or be widowed; may work in some years, 

with earnings that vary from year to year; may become 

disabled and claim Disability Insurance benefits; and may 

claim Old-Age and Survivors Insurance benefits. The 

process ends with the death of the simulated individual, 

which may occur in any year (although the risk of mortality increases with age). In each projection, hundreds of 

thousands of simulated individuals go through those processes, with each individual having a unique “lifetime.” 

For example, a simulated man may in 2010 be 27, single, 

working full time, and earning $33,210. If he does not 

die, he will be 28 in 2011, but he may get married, switch 

to working part time, and experience a decline in earnings to $27,013. For the purposes of the projections, each 

individual in the sample represents 1,000 people.

As in real life, many outcomes are determined partly by 

an individual’s characteristics and partly by chance. The 

probability that a person will marry, for instance, has 

been observed to be correlated with age, sex, birth year, 

current marital status, and education. (For example, the 

probability of getting married is much higher for a single 

25-year-old woman than for a 59-year-old widow.) Once 

the probability of marriage is estimated for an individual, 

a random number between zero and one is drawn. If that 

number is lower than the computed probability, the person is projected to get married. The same process is used 

to project work activity, disability status, and many other 

life events. 

The detail of the modeling requires assumptions about 

individual decisions, but the techniques are calibrated so 

that the characteristics of the sample each year match the 

characteristics projected for the U.S. economy and population as a whole. The modeling is also designed so that 

lifetime patterns of work, earnings, and other individual 

characteristics in the sample match those observed in 

actual data. 

The projection methods recognize that during the simulated individuals’ working lives, they earn money and pay 

taxes on their earnings, and if they survive long enough, 

they claim benefits based on those earnings. Thus, there 

is a direct link between Social Security revenues—which 

are closely tied to economywide earnings—and benefits. 

To obtain estimates of aggregate values, such as total 

Social Security outlays and revenues, the data from the 

hundreds of thousands of simulated individuals in the 

sample are aggregated and then multiplied by 1,000. The 

CHAPTER

1. For more information, see Josh O’Harra, John Sabelhaus, and 

Michael Simpson, Overview of the Congressional Budget Office 

Long-Term (CBOLT) Policy Simulation Model, Technical Paper 

2004-01 (January 2004), available at www.cbo.gov/Tech.cfm.
22 THE OUTLOOK FOR SOCIAL SECURITY

projection methods also link spouses, resulting in projections of earnings on a household basis, which allows 

spousal benefits to be computed directly.

Such microsimulation makes it possible to analyze in 

detail proposed changes to Social Security’s current tax 

rates or benefit formula when those changes would vary 

depending on the age, earnings level, and marital status of 

workers and beneficiaries. Using a sample that represents 

the full diversity of participants in the Social Security system allows CBO to compute separately the effects of 

those changes on each individual in the sample, as well as 

any responses he or she might have, such as altered work 

patterns.

Demographic Assumptions

CBO adopts the assumptions of the Social Security trustees to project overall demographic trends. Assumptions 

are required for three main demographic variables: the 

fertility rate, the rate of decline in mortality, and the level 

of immigration. 

As the trustees do in their 2004 report, CBO assumes 

that in the long run, the total fertility rate will equal 1.95 

children per woman, mortality rates will decline by 0.71 

percent per year, and annual net immigration will total 

900,000 people.2 CBO’s projections of marriage and 

divorce rates are also consistent with those used by the 

trustees. In addition, CBO’s projection method requires 

that mortality and marital status be distributed among 

the simulated individuals in the sample.

Individual mortality rates are set to reflect the correlation 

with earnings that is observed in the population (known 

as “differential mortality”). On average, people with 

higher household earnings live longer. Taking that correlation into account is especially important because of the 

progressivity of Social Security. The total amount of 

money that beneficiaries receive over their lifetime 

depends on both their earnings and the number of years 

they live, so ignoring differential mortality would bias 

measures of individual outcomes.

CBO simulates the annual marital history of each individual. In the case of a first marriage or remarriage, 

spouses are also matched.3

 Properly assigning those 

matches is important because spousal and survivor benefits depend on the earnings histories of both spouses (or 

former spouses, in the case of divorced or widowed people).

Economic Assumptions

The four key economic variables required for modeling 

Social Security’s finances are the rate of real earnings 

growth, the real interest rate, the inflation rate, and the 

unemployment rate. To a certain extent, the economic 

environment (and thus those variables) will depend on 

government policy, including that for Social Security. In 

principle, CBO’s Social Security projections could 

include the potential for macroeconomic-feedback 

effects. For example, large Social Security deficits could 

lead to higher net government debt, which in turn could 

lead to lower national savings and higher interest rates. 

However, under current law, those linkages are conjectural, for several reasons. First, policymakers might react 

to large Social Security deficits by running smaller deficits 

(or larger surpluses) in the rest of the budget, offsetting 

the effect of Social Security deficits on net government 

debt. Second, forward-looking households might react to 

changes in government debt by altering the level of their 

private savings. Estimates of that effect would determine 

the link between higher government debt and lower 

national savings. Such long-term effects are important, 

but they are particularly difficult to estimate.4

 For simplicity, CBO did not integrate any macroeconomic feedback in the projections in this report. Instead, it set its 

assumptions for the four economic variables equal to or 

consistent with the values assumed at the end of CBO’s 

10-year projection horizon.5

2. See Social Security Administration, The 2004 Annual Report of the 

Board of Trustees of the Federal Old-Age and Survivors Insurance 

and Disability Insurance Trust Funds (March 23, 2004), Section 

V.A, pp. 71-82.

3. See Josh O’Harra and John Sabelhaus, Projecting Longitudinal 

Marriage Patterns for Long-Run Policy Analysis, Technical Paper 

2002-2 (October 2002), and Kevin Perese, Mate Matching for 

Microsimulation Models, Technical Paper 2002-3 (November 

2002), both available at www.cbo.gov/Tech.cfm.

4. For a discussion of the economic effects of growing federal debt, 

see Congressional Budget Office, The Long-Term Budget Outlook 

(December 2003), pp. 12-18.

5. See Congressional Budget Office, The Budget and Economic Outlook: Fiscal Years 2005 to 2014 (January 2004), Chapter 2. 
CHAPTER THREE ASSUMPTIONS AND METHODS USED IN THIS ANALYSIS 23

For Social Security projections, the two most important 

economic variables are the rate of earnings growth and 

the interest rate on Treasury bonds held in the trust 

funds. CBO assumes that real earnings will grow by an 

average of 1.27 percent annually. (That assumption is 

determined primarily by an assumption about the rate of 

productivity growth.)6

 CBO also assumes a real interest 

rate of 3.3 percent a year, the projected real rate on 10-

year Treasury bonds. That assumed interest rate does not 

affect projections of annual Social Security outlays or 

dedicated revenues, but it is used to compute the interest 

earned on trust fund holdings. It also serves as the discount rate used in present-value calculations. In estimates 

of present value, the higher the discount rate, the less 

weight that large future Social Security deficits receive in 

the calculations, and therefore the smaller the long-term 

summarized deficit.

In addition, CBO assumes that annual inflation—as 

measured by the growth in the consumer price index for 

urban wage earners and clerical workers, or CPI-W—will 

be 2.2 percent and that the unemployment rate will be 

5.2 percent.

Disability Assumptions

The last two assumptions required for projections involve 

rates of disability incidence (the percentage of workers 

eligible for DI benefits who become entitled to them in a 

given year) and disability termination (the percentage of 

DI beneficiaries who leave the rolls because of death or 

recovery). The cost of the DI program depends on the 

number of people who qualify for benefits. (Disability 

rates also affect the level of total OASI benefits, because 

once disabled beneficiaries reach the normal retirement 

age, they receive retirement benefits equivalent to the disability benefits they received previously.) Disability rates 

are difficult to project with any certainty since they are 

determined not only by the incidence of specific medical 

impairments but also by program standards, social trends, 

and economic conditions.

CBO uses the same assumptions about future trends in 

disability incidence and termination as the Social Security 

trustees. Specifically, 5.8 out of every 1,000 eligible workers are assumed to become disabled each year over the 

long run. The vast majority of DI terminations result 

either from the automatic transition to retirement benefits at the normal retirement age or from death. Mortality 

rates for DI beneficiaries are projected to remain about 

10 times higher than for the population as a whole but to 

decline at the same rate as overall mortality.

Revenue Projections 

CBO projects payroll tax revenues by directly summing 

the taxes paid by each simulated worker. For every individual between the ages of 16 and 90, the projections 

indicate whether the person works and, if so, whether 

part time or full time and at what level of earnings.7

The probability that a person will be in the labor force is 

estimated on the basis of his or her age, sex, marital status, beneficiary status, and past work history. However, 

not everyone who is in the labor force finds a job; on the 

basis of the assumption about the overall unemployment 

rate, some of those people are projected to be unemployed.

Next, each worker is assigned a level of earnings. Earnings 

are based in part on age and education, but they vary 

even within groups of people with similar demographic 

characteristics. For example, two 47-year-old highschool-educated women are unlikely to earn the same 

amount of money. The best predictor of someone’s earnings is his or her earnings in the previous year. Therefore, 

each simulated individual is assigned a lifetime earnings 

level that—along with age, education, hours worked, and 

some random annual variation—determines earnings in 

each year. In addition, all individual earnings are adjusted 

annually on the basis of projected growth in average earnings nationwide.

That process results in a representative annual earnings 

distribution for the economy. Using payroll tax rates and 

the projected taxable maximum, CBO can then calculate 

the payroll taxes paid by each individual. Total payroll tax 

revenues are simply the sum of those individual taxes. 

6. For a discussion of the components of earnings growth, see Social 

Security Administration, The 2004 Annual Report, pp. 85-89. 

CBO does not make a specific assumption about the growth of 

labor productivity but instead makes an assumption about total 

factor productivity. Its economic model then computes the effective growth rate of labor productivity. 

7. For details, see Amy Rehder Harris and John Sabelhaus, Projecting 

Longitudinal Earnings Patterns for Long-Run Policy Analysis, Technical Paper 2003-02 (April 2003); and O’Harra, Sabelhaus, and 

Simpson, Overview of the Congressional Budget Office Long-Term 

(CBOLT) Policy Simulation Model, Section 5.4, both available at 

www.cbo.gov/Tech.cfm.
24 THE OUTLOOK FOR SOCIAL SECURITY

Estimating the income taxes that higher-income recipients pay on their Social Security benefits is more complicated than estimating payroll taxes because the former 

depends in part on nonwage income and itemized deductions. CBO imputes that information for each simulated 

individual on the basis of the relationships between nonwage income, benefits, and wages observed in recent tax 

data. Those relationships are assumed to hold true in the 

future, and individual income taxes are assigned under 

the assumption that average income tax rates will remain 

relatively constant. (That assumption differs from current 

income tax law; for details, see Box 3-1.)

Benefit Projections 

CBO’s simulations of individual work histories serve as 

the basis for projecting Social Security benefits. The last 

piece of information needed to compute individual benefits is the age at which a worker claims benefits. In the 

simulations, workers begin receiving benefits either when 

they successfully apply for DI benefits or when they 

choose to claim retirement benefits.

Box 3-1.

Projecting the Taxation of Benefits Under Different Assumptions 

About Future Income Tax Rates

All of the projections presented in this study are 

made under the assumption that the laws governing 

Social Security will not change. Such a baseline 

approach means that future analyses of proposed 

changes to the program can be compared with these 

projections to clearly identify the effects of the proposals. However, future revenues from income taxes 

paid on Social Security benefits depend on future 

income tax law, which is logically distinct from 

Social Security law and could be amended many 

times in coming years. 

Most parameters of the income tax system—such as 

the level of personal exemptions, standard deductions, and tax brackets—are indexed to inflation. 

Earnings generally grow faster than inflation, so if no 

changes are made to tax law, average tax rates will 

automatically increase because of the interaction 

between economic growth and the progressive structure of the income tax.1 Over the past half century, 

total federal revenues have ranged from 16.1 percent 

to 20.8 percent of gross domestic product (GDP). In 

the absence of any changes to federal tax law, revenues will rise to 24.7 percent of GDP in 2050 and 

continue growing thereafter, the Congressional Budget Office projects. 

Such high rates of taxation are without historical precedent. Thus, the projections in this study are based 

on a scenario in which the average rate at which 

income is taxed remains constant over the projection 

period—which is equivalent to assuming that the 

income tax system is indexed to the growth of earnings beginning in 2015. The Social Security trustees 

use a similar assumption in their projections.

The income tax system treats income from Social 

Security benefits differently than it treats other 

income. Single filers must pay taxes on Social Security benefits if the sum of their non-Social Security 

income and half of their benefits exceeds $25,000. 

The threshold for joint filers is $32,000. Under current law, those thresholds remain fixed, with no 

adjustment for earnings growth or inflation. Therefore, even under the assumption of constant average 

income tax rates, the taxation of benefits will 

increase. Specifically, revenues from the taxation of 

Social Security benefits are projected to grow under 

the current-law scenario from 3.4 percent of benefits 

last year to 9.4 percent in 2050 and 11 percent in 

2090. Under the assumption of constant income tax 

rates, by comparison, those revenues rise to 5.7 percent in 2020 and then stabilize at 6.6 percent by 

2070 (see the figure at right).

Assuming growth in the taxation of benefits consistent with current income tax law would not signifi1. See Congressional Budget Office, The Long-Term Budget 

Outlook (December 2003), Chapter 5.
CHAPTER THREE ASSUMPTIONS AND METHODS USED IN THIS ANALYSIS 25

CBO assigns individuals different probabilities of becoming disabled, depending on their earnings. Historical data 

show that workers with lower earnings are more likely to 

become disabled. For example, 55-year-old men in the 

lowest earnings decile have eight times the probability of 

becoming disabled as those in the highest earnings decile. 

If the correlation between earnings and disability rates 

were ignored, total projected outlays for DI benefits 

would be too high because there would be too many 

high-earning beneficiaries, who would receive relatively 

large benefit amounts. To avoid such bias, CBO adjusts 

an individual’s rate of disability incidence according to 

the earnings decile that the person was in during the previous year.

The transition of DI beneficiaries to retirement status at 

the normal retirement age occurs automatically in CBO’s 

modeling. Other departures from the DI rolls, whether 

due to death or to recovery, are simulated in the same way 

as disability incidence (although death and recovery rates 

for the disabled are set only by age and sex, not by earnings level).

Box 3-1.

Continued

cantly alter the projected fiscal condition of the 

Social Security system. Revenues in 2100 would 

equal 5.1 percent of GDP under that assumption, 

compared with 4.8 percent of GDP assuming constant tax rates. The balance in 2100 would amount 

to -1.7 percent of GDP instead of -2.0 percent. 

Although assuming that the income tax system is 

effectively indexed to the growth of earnings has little impact on the projected fiscal outlook for Social 

Security, it does affect the interpretation of any legislation that might alter the income tax system. When 

projections are based on current law, it is straightforward for estimators to simulate the changes that legislation would make, run new projections, and interpret any difference between the two projections as 

the fiscal implications of the legislation. But such 

changes may have a very different impact—or even 

no impact—on projections in which income taxes 

are indexed to earnings growth.

Revenues from Taxation of Social Security Benefits, 1985 to 2103

(Percentage of total benefits)

Source: Congressional Budget Office.

1985 1995 2005 2015 2025 2035 2045 2055 2065 2075 2085 2095

0

2

4

6

8

10

12

Under Constant Average

Income Tax Rates

Under Current

Income Tax Laws

Actual Projected
26 THE OUTLOOK FOR SOCIAL SECURITY

Because the entire earnings history of each individual (as 

well as that of any current spouse or past spouses) is 

known, calculating disability benefit levels is straightforward.8

 Benefits for people remaining on the rolls are then 

increased at the assumed rate of inflation in future years, 

and those benefits are summed to obtain projections of 

total disabled-worker benefits.

Eligible workers may choose to claim Social Security 

retirement benefits beginning at age 62. Although many 

people apply for benefits when they stop working, others 

cease to work years before claiming benefits, and others 

continue working even after they start claiming benefits.9

The actual pattern of claiming is difficult to model. One 

approach is to compute the most advantageous time to 

claim benefits given a worker’s earnings and life expectancy. The observed pattern, however, does not agree with 

such theoretical projections; in particular, more workers 

apply for benefits at 62 and 65 than is predicted. CBO’s 

projections are calibrated to the observed data. They are 

also adjusted to take into account the scheduled increase 

in the normal retirement age that is under way, which will 

induce workers to claim benefits somewhat later, on average. 

The benefits that a retired worker initially receives are 

based on his or her birth year, earnings history, and age 

when claiming benefits. In future years, those benefits 

increase with inflation. In cases in which recipients continue to work, the additional earnings may also result in 

higher benefits.

The benefits that married, widowed, and many divorced 

beneficiaries receive depend on the combination of the 

worker’s and the spouse’s earnings histories. Spousal benefits (including those paid to “dual” beneficiaries, who 

receive benefits based on both their and their spouse’s 

earnings histories) can be computed directly. Benefits 

paid to other dependents, such as children, are estimated 

on an aggregate basis, using methodology developed by 

the Social Security Administration. They represent a 

small portion of total benefits: about 5 percent in 2003.

In addition to benefits, CBO projects administrative 

expenses for the Social Security program. Those costs are 

computed as a percentage of total benefit outlays, on the 

basis of data from the Social Security Administration.

The Uncertainty of Long-Term 

Social Security Projections

In general, the farther ahead a projection looks, the less 

certain it is. In the case of outlays for Social Security, 

however, most of the increase relative to gross domestic 

product over time will be driven by foreseeable demographic trends. Nearly everyone who will be paying taxes 

or receiving benefits in the next 25 years has already been 

born, so it is quite certain that outlays will rise substantially relative to GDP over the next few decades. Nevertheless, uncertainty exists about the future economic, 

demographic, and programmatic assumptions discussed 

above. Fully understanding the projections requires looking at both the most likely outcome and the probable 

range of outcomes.10

The values of the economic and demographic factors 

underlying the projections will vary from year to year in 

the future, as they have in the past, with some ending up 

higher than expected and others lower. Thus, the pattern 

of those values—and their net effect on Social Security’s 

finances—will differ from year to year. Standard statistical techniques allow economists to quantify future uncertainty on the basis of historical data. CBO first computes 

probability distributions for its projections of fertility 

rates, earnings growth, and other major assumptions by 

looking at how those factors have varied historically. It 

then randomly picks annual values for each factor from 

the estimated distributions to create a set of input values 

that are random but consistent with historical patterns. 

Just as it does with its basic assumptions, it can use that 

set of values to compute the effects on Social Security. 

Repeating that process hundreds of times with different 

sets of random (but historically plausible) input values

8. For a discussion of how those benefits are computed, see Congressional Budget Office, Social Security: A Primer (September 2001), 

pp. 19-25.

9. Virtually all eligible workers apply for retirement benefits by age 

70, because they would forgo some benefits if they waited longer.

10. For more discussion of the uncertainty of Social Security projections, see Congressional Budget Office, Uncertainty in Social Security’s Long-Term Finances: A Stochastic Analysis (December 2001), 

pp. 2-4; and 1999 Technical Panel on Assumptions and Methods, 

Report to the Social Security Advisory Board (November 1999), pp. 

70-78, available at www.ssab.gov/Rpt99.pdf.
CHAPTER THREE ASSUMPTIONS AND METHODS USED IN THIS ANALYSIS 27

allows CBO to produce probability distributions for various measures of Social Security’s finances.11Displaying an entire probability distribution is impractical, which is why figures and tables in this study show the 

10th and 90th percentiles surrounding the expected estimate.12 By definition, there is a 10 percent chance that 

the outcome will be below the 10th percentile, a 10 percent chance that it will be above the 90th percentile, and 

an 80 percent chance that it will fall between those levels.

11. That process is explained in more detail in Congressional Budget 

Office, Uncertainty in Social Security’s Long-Term Finances, Chapters 4 and 5. In addition, pp. 9-10 of that report discuss the types 

of uncertainty not captured by CBO’s methodology. Some equations and data have been updated since that report (current data 

are available on request). The same methodology was used in the 

Social Security trustees’ 2004 report to produce Appendix E. 12. Further detail about uncertainty distributions is available on 

request.

A

Differences from the Trustees’ 2004 Report

Both the Congressional Budget Office (CBO) and 

the Social Security trustees conclude that under current 

law, the program’s scheduled outlays will exceed scheduled revenues over the next 50 years and that annual 

Social Security deficits will be large and growing over the 

long term.1

 CBO projects that by 2080 (the last year for 

which the trustees have published projections), Social 

Security outlays will equal 6.7 percent of gross domestic 

product (GDP) and revenues will equal 4.9 percent. The 

Social Security trustees project that in that year, outlays 

will equal 6.6 percent of GDP and revenues 4.6 percent. 

Those numbers differ slightly, but they point to the same 

conclusion: that under current law, the program will generate a sustained and significant demand for budgetary 

resources.

Annual Revenues and Outlays 

Relative to GDP

The trustees project that the Social Security deficit will 

equal 2.1 percent of GDP in 2080, whereas CBO projects a deficit of 1.8 percent. That disparity results from 

different economic assumptions (shown in Table A-1) 

and different modeling techniques. As explained in 

Chapter 3, although CBO employs the same demographic assumptions as the trustees, its long-term economic assumptions are consistent with the ones used in 

its 10-year projections.2 Some of those differences in 

assumptions improve the financial outlook for Social

Table A-1.

CBO’s and the Social Security Trustees’ 

Long-Term Economic Assumptions

(Percent)

Source: Congressional Budget Office.

Security and others worsen it. CBO assumes slightly 

higher average productivity growth, resulting in lower 

annual projected deficits. The assumption about productivity growth also leads CBO to project a higher level of 

outlays in real dollars. In addition, CBO assumes a lower 

rate of inflation than the trustees do, which results in 

higher outlays for the Social Security system relative to 

taxable payroll.3

A final difference in economic assumptions involves the 

share of compensation that workers will receive in the 

form of fringe benefits. Historically, nontaxable fringe 

benefits have made up a growing share of compensation 

and wages a declining share. Consequently, taxable payroll has shrunk as a percentage of GDP. Both CBO and 

the Social Security trustees assume that the trend will 

continue, but the trustees estimate that it will occur at a 

faster pace. Thus, they project that taxable payroll will be

APPENDIX

1. See Social Security Administration, The 2004 Annual Report of the 

Board of Trustees of the Federal Old-Age and Survivors Insurance and 

Disability Insurance Trust Funds (March 23, 2004), for the trustees’ projections.

2. See Congressional Budget Office, The Budget and Economic Outlook: Fiscal Years 2005 to 2014 (January 2004), Chapter 2.

CBO

Social Security 

Trustees

Real Earnings Growth 1.3 1.1

Real Interest Rate 3.3 3.0

Inflation 2.2 2.8

Unemployment Rate 5.2 5.5

3. Inflation increases earnings, and thus tax revenues, immediately. 

Benefit payments, however, are based on past inflation, so they are 

increased by inflation only after a delay. That lag makes higher 

inflation slightly advantageous for the system’s finances and vice 

versa.
30 THE OUTLOOK FOR SOCIAL SECURITY

Figure A-1.

CBO’s and the Social Security Trustees’ Projections of Annual Social Security 

Outlays and Revenues, 1985 to 2080

(Percentage of GDP)

Sources: Congressional Budget Office; Social Security Administration, The 2004 Annual Report of the Board of Trustees of the Federal OldAge and Survivors Insurance and Disability Insurance Trust Funds (March 23, 2004).

Note: Outlays comprise scheduled benefits and administrative costs; revenues come from Social Security payroll taxes and from income 

taxes paid on benefits.

a smaller share of GDP than CBO projects. And since 

Social Security revenues are a fairly constant portion of 

taxable payroll, as taxable payroll falls relative to GDP, 

revenues do as well (see Figure A-1). The trustees’ projection of revenues relative to GDP actually falls below the 

range of uncertainty for CBO’s revenue projection. That 

occurs because in CBO’s analyses of uncertainty, the 

assumption about the share of compensation received as 

fringe benefits does not vary.

Overall, CBO’s economic assumptions result in higher 

projected outlays relative to GDP than the trustees’ 

assumptions do. CBO’s modeling techniques, by contrast, result in lower projected outlays than the trustees’ 

do when using the same economic assumptions. CBO 

and the trustees take different approaches to projecting 

the distribution of future beneficiaries’ earnings; that and 

other modeling differences cause CBO to project lower 

average retirement benefits than the trustees do, especially for men retiring around 2020 and later. The economic and modeling differences completely offset each 

other by 2080. In earlier years, however, the effects of the 

differences in modeling techniques are larger, so CBO’s 

projection of outlays relative to GDP is lower than the 

trustees’ projection.

Annual Revenues and Outlays 

Relative to Taxable Payroll

The trustees project that the Social Security deficit will 

equal 6.0 percent of taxable payroll in 2080, compared 

with CBO’s projection of 4.9 percent. That difference 

1985 1995 2005 2015 2025 2035 2045 2055 2065 2075

0

3

4

5

6

7

8

9

10

Outlays (Trustees)

Outlays (CBO)

Revenues (CBO)

Revenues (Trustees)

Actual Projected
APPENDIX A DIFFERENCES FROM THE TRUSTEES’ 2004 REPORT 31

stems almost entirely from disparate projections of outlays. For 2080, the trustees project outlays equaling 19.4 

percent of taxable payroll, about 6 percent higher than 

CBO’s projection (18.3 percent of taxable payroll).

Roughly one-third of the difference in projected outlays 

relative to taxable payroll reflects different long-term economic assumptions. If CBO used the trustees’ 2004 

intermediate economic assumptions in its model, projected outlays in 2080 would equal 18.6 percent of taxable payroll—about 4 percent lower than the trustees’ 

projection rather than 6 percent lower. The remaining 

difference in projected outlays is attributable to different 

modeling techniques.

Summarized Revenues and Outlays 

Relative to Taxable Payroll

The 75-year summarized balance is -1.89 percent of taxable payroll in the trustees’ 2004 report, compared with 

-1.00 percent in CBO’s projections. Like the difference in 

annual balances relative to taxable payroll, the disparity is 

essentially all on the outlay side: the trustees project summarized outlays of 15.7 percent of taxable payroll, 

whereas CBO projects 14.9 percent. 

Different long-term economic assumptions account for 

about 40 percent of the difference in projected summarized balances. If CBO used the trustees’ 2004 intermediate economic assumptions in its model, its projected 75-

year summarized balance would be -1.36 percent of taxable payroll. In addition to the different assumptions 

about earnings growth and inflation discussed above, 

CBO assumes a higher interest rate than the trustees do. 

The interest rate does not affect projections of annual 

outlays or revenues, but it is used as the discount rate in 

calculations of present value. Thus, CBO’s assumption of 

a higher interest rate places a lower weight on the large 

deficits in the distant future and results in lower projected 

summarized balances.

Estimates of Uncertainty

Finally, CBO focuses on a different measure of projection 

uncertainty than the Social Security trustees do. Both 

CBO and the trustees present projections that are based 

on the demographic and economic conditions they 

believe to be most likely in the future. The trustees call 

that projection their intermediate scenario. Their report 

highlights the issue of uncertainty by also providing lowcost and high-cost scenarios in which each assumption is 

changed to either a low- or high-cost level. The ranges of 

uncertainty that CBO provides are different in nature.4

As explained in Chapter 3, CBO uses historical data and 

standard statistical techniques to run hundreds of simulations, which generate an entire probability distribution 

for every outcome. Although the body of the trustees’ 

report uses the scenario approach, that report also presents a probability distribution in Appendix E.

4. For more details about the differences between CBO’s and the 

Social Security trustees’ methods of projecting uncertainty, see 

Congressional Budget Office, Uncertainty in Social Security’s 

Long-Term Finances: A Stochastic Analysis (December 2001).

B

Individual Benefit Measures

for Male and Female Beneficiaries

Table 2-1 in Chapter 2 shows the Congressional 

Budget Office’s projections of the median Social Security 

benefits that retired workers would receive under current 

law, by birth cohort and household earnings quintile. 

Benefit levels vary not only by those factors but also by 

sex, since men and women have different earnings patterns and different life expectancies, on average. To provide more detail, this appendix shows the same measures 

as Table 2-1—median first-year retirement benefits, the 

first-year replacement rate, and the present value of lifetime retirement benefits—separately for male and female 

beneficiaries. The projections include both the benefits 

scheduled to be paid under current law and the benefits 

that could be financed by trust fund balances.

APPENDIX
34 THE OUTLOOK FOR SOCIAL SECURITY

Table B-1.

Measures of the Benefits Received by the Median Retired Worker, by Sex, 

Birth Cohort, and Earnings Level

Continued

Source: Congressional Budget Office.

Note: All values are net of income taxes paid on benefits and credited to the Social Security trust funds. First-year benefits and replacement 

rates are simulated as if all workers claimed benefits at age 65. In the trust-fund-financed measures, all beneficiaries are subject to an 

across-the-board cut in benefits each year so total annual benefits equal total annual revenues once the trust funds are exhausted.

10-Year Birth 

Cohort Beginning 

in Specified Year

First-Year Benefits

(2004 dollars)

First-Year Replacement

Rate (Percent)a

Present Value of Lifetime

Benefits (2004 dollars)b

Scheduled

Trust-FundFinanced ScheduledTrust-FundFinanced ScheduledTrust-FundFinanced 

Males

Median

1940 17,200 17,200 38.5 38.5 149,000 149,000

1950 17,200 17,200 39.7 39.7 151,500 151,400

1960 17,000 17,000 38.4 38.4 156,800 156,100

1970 20,000 20,000 37.6 37.6 185,700 177,700

1980 22,900 21,900 37.1 35.4 218,400 183,200

1990 26,200 20,400 36.6 28.5 255,100 190,500

2000 29,500 22,300 36.8 27.8 290,900 208,900

Median in Lowest Household Earnings Quintile

1940 9,000 9,000 58.0 58.0 74,000 74,000

1950 9,200 9,200 59.6 59.6 76,400 76,300

1960 9,400 9,400 58.7 58.7 78,200 78,100

1970 10,400 10,400 59.8 59.8 85,700 82,700

1980 11,000 10,500 64.3 61.6 93,600 80,200

1990 12,500 9,700 63.9 49.9 105,600 78,600

2000 14,000 10,500 64.2 48.2 135,000 94,800

Median in Middle Household Earnings Quintile

1940 17,700 17,700 37.7 37.7 172,300 172,300

1950 17,800 17,800 39.3 39.3 172,100 172,100

1960 17,600 17,600 38.2 38.2 179,600 179,000

1970 20,600 20,600 37.2 37.2 212,100 203,100

1980 23,600 22,500 36.9 35.6 256,000 213,700

1990 26,900 21,100 36.3 28.2 299,000 224,600

2000 30,200 22,800 36.6 27.7 344,700 246,500

Median in Highest Household Earnings Quintile

1940 20,900 20,900 22.1 22.1 232,800 232,800

1950 22,900 22,900 22.4 22.4 265,900 265,900

1960 23,800 23,800 21.0 21.0 275,900 275,500

1970 26,900 26,900 20.3 20.3 329,400 309,000

1980 31,100 30,100 18.2 17.6 388,800 321,400

1990 35,300 27,500 17.7 13.8 446,900 336,600

2000 39,800 30,000 18.1 13.7 513,800 372,800
APPENDIX B INDIVIDUAL BENEFIT MEASURES FOR MALE AND FEMALE BENEFICIARIES 35

Table B-1.

Continued

Note: The overall median values differ from the median values in the middle quintile because individuals are sorted into quintiles on the 

basis of household earnings, not benefit levels.

a. First-year benefits as a percentage of average career earnings.

b. The present value of all retired-worker benefits received.

10-Year Birth 

Cohort Beginning 

in Specified Year

First-Year Benefits

(2004 dollars)

First-Year Replacement

Rate (Percent)a

Present Value of Lifetime

Benefits (2004 dollars)b

Scheduled

Trust-FundFinanced ScheduledTrust-FundFinanced ScheduledTrust-FundFinanced 

Females

Median

1940 10,200 10,200 52.6 52.6 99,600 99,600

1950 11,600 11,600 49.5 49.5 114,500 114,500

1960 12,200 12,200 46.4 46.4 127,200 126,000

1970 14,000 14,000 45.3 45.3 150,300 141,500

1980 16,300 15,600 44.5 43.0 174,900 146,100

1990 18,200 14,200 44.5 34.6 199,900 150,800

2000 20,800 15,600 44.3 33.3 234,500 169,500

Median in Lowest Household Earnings Quintile

1940 6,500 6,500 79.9 79.9 50,500 50,500

1950 7,700 7,700 75.0 75.0 58,700 58,700

1960 8,000 8,000 70.3 70.3 64,800 64,700

1970 9,000 9,000 70.2 70.2 73,500 71,300

1980 9,600 9,100 72.8 69.8 79,400 68,300

1990 10,800 8,400 72.7 56.2 94,200 71,100

2000 12,100 9,200 72.6 54.1 107,000 80,500

Median in Middle Household Earnings Quintile

1940 11,600 11,600 49.6 49.6 112,300 112,300

1950 12,700 12,700 47.6 47.6 130,000 130,000

1960 13,200 13,200 44.6 44.6 145,300 144,800

1970 15,400 15,400 43.6 43.6 171,500 162,000

1980 18,100 17,400 42.7 41.4 205,600 171,600

1990 20,300 15,800 42.5 32.9 235,700 178,100

2000 23,000 17,400 42.5 32.0 273,100 196,600

Median in Highest Household Earnings Quintile

1940 14,700 14,700 41.6 41.6 164,300 164,300

1950 17,500 17,500 37.8 37.8 196,000 195,300

1960 18,100 18,100 35.6 35.6 213,600 210,300

1970 20,500 20,500 35.2 35.2 246,200 228,200

1980 25,000 23,900 32.4 31.1 307,000 255,600

1990 28,100 21,800 33.0 25.7 350,300 263,100

2000 32,000 24,100 32.5 24.4 400,000 291,300