Social Security—Reinforcing the Foundation 

of U.S. Retirement in a Time of Uncertainty
Social Security Actuarial Status

The 2020 Annual Report of the Board of Trustees 

of the OASI and DI Trust Funds

...and Developments Since Then

Karen Glenn, Deputy Chief Actuary

Social Security Administration

November 6, 2020
Social Security Basics
Social Security Trust Funds

• Two legally distinct trust funds:

– OASI = Old-Age and Survivors Insurance

– DI = Disability Insurance

• Financial operations are overseen by the Social Security Board of 

Trustees

• The two funds are often looked at on a theoretical combined 

basis, and referred to as OASDI

– As of September 30, 2020, the trust funds hold about $2.91 trillion in reserves
Social Security Trust Funds

• Why do we have trust funds?

– The trust funds provide an essential reserve so benefits can be paid even when 

current income alone is not enough

– Social Security (OASI and DI) cannot borrow; can only spend what has been 

collected
Social Security Trust Funds

• The combined funds have run surpluses since the early 1980s 

and through calendar year 2019 (and likely 2020)

• Beginning in 2021, we project that combined asset reserves will 

start to decline until they are depleted in 2035

• The OASI fund alone is projected to be depleted in 2034; the DI 

fund alone in 2065

• Note that these latter two bullets are based on our pre-COVID 

projections!
How Is Social Security Financed (Income)?

• Payroll taxes

– Employees and employers each pay 6.2% of covered earnings

– The self-employed pay 12.4% of covered earnings

– On earnings up to $137,700 in 2020 ($142,800 in 2021)

• Taxes on Social Security benefits

– Higher-income beneficiaries pay federal income tax on their benefits

• Interest on trust fund reserves

– Invested in interest-bearing securities of the US government
Where Does the Money Go (Cost)?

• Benefit payments

– About 64 million people getting benefits as of December 2019:

• 48 million retired workers and dependents of retired workers

• 6 million survivors of deceased workers

• 10 million disabled workers and dependents of disabled workers

• Administrative expenses

– Only about 0.6 percent of total program cost in 2019
Income and Cost for Calendar Year 2019

Combined 

OASI & DI 

Trust Funds

Payroll taxes

$944 billion

Benefits

$1,048 billion

Administrative expenses

$6 billion

Taxes on benefits

$36 billion

Interest

$81 billion

Railroad exchange

$5 billion
2020 Trustees Report
What is the Legislative Mandate for the Annual 

Trustees Report?

1. Trust Fund operations of the past year and the next five years

2. Actuarial status of the trust funds

– This means the ability to meet the cost of scheduled benefits with 

scheduled revenue and trust fund reserves

– And the extent to which scheduled revenue would fall short under 

current law, indicating the size of legislative changes that will be needed
Primary Changes for the 2020 Trustees Report

First, an important caveat! The projections in the 2020 Trustees Report (released April 22, 

2020) do NOT reflect the potential implications of the COVID-19 pandemic, due to (1) the 

timing of the development of assumptions for the report and (2) the timing of the 

recognition of the pandemic. 

1. DI reserve depletion extended another 13 years, from 2052 to 2065

a) Applications and benefit awards remained at historically low levels in 2019

b) Lower ultimate assumed disability incidence rate

c) Gradual increase to ultimate incidence rate

2. OASI reserve depletion is 2034, the same as in the 2019 report

3. OASDI reserve depletion is 2035, the same as in the 2019 report

4. 75-year actuarial deficit increased by 0.43 percent of payroll (versus expected increase 

of 0.05 percent from change in valuation period alone)
SOLVENCY: 

Annual Cost and 

Non-Interest 

Income as Percent 

of Taxable Payroll

Persistent negative annual cash-flow 

balance starting in 2010.

79 percent of scheduled benefits still 

payable at trust fund reserve depletion.

Annual Deficit in 2094: 4.51 percent of 

payroll – 0.36 percent larger than last 

year

0%

5%

10%

15%

20%

25%

2005 2015 2025 2035 2045 2055 2065 2075 2085 2095

Calendar Year

OASDI Non-Interest Income, Cost and Expenditures 

as Percentages of Taxable Payroll

Cost: Scheduled and 

payable benefits

Cost: Scheduled but not fully 

payable benefits

Non-interest Income Expenditures: Payable benefits = income 

after trust fund depletion in 2035

Payable benefits as percent 

of scheduled benefits:

2020-34: 100%

2035: 79%

2094: 73%

Historical Projected

Cost: Scheduled and 

payable benefits

Cost: Scheduled but not fully 

payable benefits

Non-interest Income Expenditures: Payable benefits = income 

after trust fund depletion in 2035

Payable benefits as percent 

of scheduled benefits:

2020-34: 100%

2035: 79%

2094: 73%

Historical Projected
SUSTAINABILITY: 

Cost as percent 

of GDP

Rises from a 4.2 percent average in 

1990-2008, to about 5.9 percent by 

2038, then declines to 5.8 percent by 

2053, and generally increases to 5.9 

percent by 2094.

0%

1%

2%

3%

4%

5%

6%

7%

8%

1990 2000 2010 2020 2030 2040 2050 2060 2070 2080 2090

Calendar Year

OASDI Cost and Non-Interest Income as a Percentage of GDP

Historical Projected

Cost

Non-interest Income
Aging: 

Change in Age 

Distribution

Mainly due to drop in birth rates

0.00

0.05

0.10

0.15

0.20

0.25

0.30

0.35

0.40

0.45

0.50

1940 1950 1960 1970 1980 1990 2000 2010 2020 2030 2040 2050 2060 2070 2080 2090 2100

Aged Dependency Ratio 2020 TR

Population 65+/(20-64) 

Actual and TR Intermediate

TFR remains at 3.0 after 1964

TFR remains at 3.3 after 1964

Historical Projected
ADEQUACY: 

Replacement 

Rates Based on 

the 2020 TR

Source: Annual Recurring Actuarial Note #9 at www.ssa.gov/oact/NOTES/ran9/index.html

0

10

20

30

40

50

60

70

1940 1960 1980 2000 2020 2040 2060 2080

Calendar Year

Scheduled Monthly Benefit Levels as Percent of Career-Average 

Earnings by Year of Retirement at age 65

Low Earner ($25,039 for 2020; 24th percentile)

Medium Earner ($55,642 for 2020; 57th percentile)

High Earner ($89,027 for 2020; 81st percentile)

Max Earner ($137,700 for 2020; 100th percentile)

Historical Projected
Payable Benefits 

Under the Law, 

After Trust Fund 

Reserves Are 

Depleted, Are Even 

Lower

Source: Annual Recurring Actuarial Note #9 at www.ssa.gov/oact/NOTES/ran9/index.html

0

10

20

30

40

50

60

70

1940 1960 1980 2000 2020 2040 2060 2080

Calendar Year

PAYABLE Monthly Benefit Levels as Percent of Career-Average 

Earnings by Year of Retirement at age 65

Low Earner ($25,039 for 2020; 24th percentile)

Medium Earner ($55,642 for 2020; 57th percentile)

High Earner ($89,027 for 2020; 81st percentile)

Max Earner ($137,700 for 2020; 100th percentile)

Historical Projected
Effects of COVID-19
After the 2020 Trustees Report: COVID Effects

• Employment and labor force participation rates have declined along with the COVIDinduced recession—will they remain low, or rebound soon?

• Will there be persistent and even cumulative effects on mortality (and morbidity) in 

the longer term?

– Direct virus-related immediate deaths, whether diagnosed or not

– Indirect deaths due to avoidance of medical treatment

– Increased deaths of despair/violence—suicide, homicide, overdose?

– Decreased life expectancy from compromise for COVID survivors; how much?

• Other economic and demographic effects? Fertility, immigration?

• So much depends on government and individual responses, along with the timing and 

efficacy of a vaccine
COVID Effects: GDP, Earnings, and Payroll Tax Revenue

• Social Security payroll tax revenue will certainly be lower than we projected for 2020 

due to lower earnings—by between 5 and 10 percent

– Technicality: due to the way tax revenues are transferred from Treasury to the Social 

Security trust funds, the trust funds won’t be affected until 2021

• Neither the employer payroll tax deferral in COVID legislation nor the employee payroll 

tax deferral in the presidential memorandum affect revenue to the trust funds

• What will effects be beyond 2020? There has been a substantial economic recovery 

since the second quarter of 2020 
COVID Effects: Timing of Benefit Applications

• There has been speculation in the press 

and elsewhere that the COVID-induced 

recession will cause workers to apply for 

retirement benefits earlier than they 

would have otherwise

• We aren’t seeing this in the data—yet

• Similarly, we aren’t yet seeing evidence 

of increased DI or SSI applications

• Speculation is that folks have been 

relying on extended unemployment 

benefits, but might start applying 

earlier if the recession persists

Disabled worker data through September 2020 (numbers in thousands)

Source: https://www.ssa.gov/oact/STATS/dibGraphs.html
Bottom Line: Effects of COVID on Trust Funds

• In April, we speculated a potential 15 percent reduction in earnings and payroll tax for 

one or two years, and then full recovery: Trust Fund reserve depletion advanced from 

early 2035 to mid- or early 2034

– We now think this speculation was probably too pessimistic

• Now, consider an alternative scenario: assume total earnings in 2020 are reduced 5 to 

10 percent below the 2020 TR intermediate projection, with recovery in 2021 and 2022

– This could happen if there is no substantial wave in the fall with resulting closure of the 

economy

– The trust fund reserve depletion date for the combined OASI and DI Trust Funds would likely 

be sometime in 2034, all else equal

– In September, CBO estimated that COVID would hasten trust fund depletion by one year
Bottom Line: Effects of COVID on Trust Funds

•If, instead, a fall/winter return to closure due to the pandemic extends 

through 2021, and possibly beyond, then negative effects on the actuarial 

status could be substantially larger

• Trust Fund reserve depletion could be earlier than 2034, and the percent of 

scheduled benefits payable after depletion could be reduced 

• The Bipartisan Policy Center recently released several possible scenarios, 

with the most pessimistic leading to OASDI combined trust fund reserve 

depletion 7 years earlier (2028)
Bottom Line: Effects of COVID on Trust Funds

• The 2021 Trustees Report, scheduled to be released in April 2021, will 

reflect our best estimates of the impacts of COVID-19

• We have had, and will continue to have, many discussions about 

assumptions with the trustees and their staffs...

• And we will continue to monitor emerging experience and knowledge 

about the virus and vaccines/therapies
Legislative Changes
Why Do These Actuarial Projections Matter?

• Long-term projections provide information to assess solvency and 

changes needed to eliminate shortfalls

• If trust fund reserves were to become depleted:

• Full benefits could not be paid timely

• NO pressure on the budget or federal debt

• So Congress must act, as it always has

• Straightforward solutions:

• Add revenue and/or lower cost for OASDI

• Comprehensive changes implemented by 2035
How to Eliminate the Long-Term Actuarial Deficit

• Make choices addressing OASDI deficits 2035–2094:

• Raise scheduled revenue after 2034 by about one-third

• Reduce scheduled benefits after 2034 by about one-fourth

• Or some combination of the two
Ways to Lower Cost

• Lower benefits for retirees—not disabled?

• Increase normal retirement age (lowers OASI cost, but increases DI cost)

• Can exempt long-career low earners

• Lower benefits mainly for high earners?

• Reduce PIA above some level

• Often combined with increasing PIA below some level, subject to work year requirements

• Lower benefits mainly for the oldest old?

• Reduce the COLA

• But, some say increase it with the CPI-E (based on purchase of consumers over age 62)
Ways to Increase Revenue

• Raise the 12.4 percent OASDI payroll tax rate?

• Raise tax on highest earners?

• Increase taxable maximum amount ($142,800 in 2021)

• Some tax on all earnings above the maximum

• Tax employer group health insurance premiums?

• Affects only middle class if taxable maximum remains

• Tax investment income?

• Or potentially a wealth tax?
For More Information, Go To https://www.ssa.gov/OACT/

• There you will find:

• The 2020 and all prior OASDI Trustees Reports

• Detailed single-year tables for recent reports

• Our estimates for comprehensive proposals and individual provisions

• Actuarial notes; including replacement rates

• Actuarial studies

• Extensive databases about the trust funds and program beneficiaries

• Congressional testimonies

• Presentations by OCACT employees