Session 105: Updates on Proposed Changes 

and (Current) Financial Status of Social Security

Stephen C. Goss, ASA, MAAA

Chief Actuary, US Social Security Administration

October 29, 2019 

Society of Actuaries Annual Meeting

Toronto, Canada
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0%

50%

100%

150%

200%

250%

300%

350%

400%

450%

1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050 2055

Social Security Trust Fund Ratios

Assets as Percent of Annual Cost

Trustees Report Intermediate Projections

OASDI 2019TR

OASI 2019TR

DI 2019TR

OASDI 2018TR

OASI 2018TR

DI 2018TR

Historical

DI

OASDI

OASI

Tax Rate

Reallocation

Estimated

SOLVENCY: OASDI Trust Fund Reserve Depletion in 2035 (one year later than last year)

• OASDI reserve 

depletion date varied 

from 2029 to 2042 in 

reports over the past 

29 years (1991-2019) 

• DI Trust Fund: reserve 

depletion in 2052, 

twenty years later 

than last year

Due largely to lower 

recent and near-term 

disability applications 

and awards, plus lower 

ultimate incidence
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Applications for Disability Benefits Continue to Fall

1.4

1.5

1.6

1.7

1.8

1.9

2.0

2.1

2003 2005 2007 2009 2011 2013 2015 2017 2019 2021 2023 2025 2027

(millions)

Total Social Security Disability Receipts at Disability Determination 

Services by Calendar Year: Historical and Intermediate 

Assumptions for 2012 through 2019 Trustees Reports

2012TR

2017TR

2016TR

2015TR

2014TR

2013TR

2018TR

Note: All historical and projected 

series include disabled worker, 

disabled adult child, and disabled 

widow(er) receipts. DIBs represent 

about 94% of total title II DDS 

receipts. 2019TR

• At the peak of the last 

economic cycle in 2007, 

applications were low, 

but increased rapidly in 

the recession to over 2 

million in 2010. 

• In 2016, 2017, and 2018, 

with the economy still 

below the sustainable 

full-employment level, 

applications have 

dropped well below the 

2007 level—and the 

decline continues in 2019
4

Disability Incidence Rate Falls to Historic Lows

4.0

4.5

5.0

5.5

6.0

6.5

1990 1995 2000 2005 2010 2015 2020 2025 2030

DI Age-Sex-Adjusted Incidence Rates:

Historical and Intermediate Assumptions for 2012 through 2019 Trustees 

Report

2012TR

2013TR

2014TR

2015TR

2016TR

2017TR

Average 1990-2018 5.19

Ultimate Assumption 5.20

2018TR

2019TR

• DI disabled worker 

incidence rate rose 

sharply in the 

recession, and has 

declined since the 

peak in 2010 to 

extraordinarily low 

levels for 2016, 

2017, and 2018

• The ultimate 

incidence rate was 

lowered to 5.2 for 

the 2019 report
5

OASDI Annual Cost and Non-Interest Income as Percent of Taxable Payroll 

Persistent Negative Annual Cash-Flow Balance Starting in 2010 

0%

5%

10%

15%

20%

25%

2005 2015 2025 2035 2045 2055 2065 2075 2085 2095

Calendar year

Cost: Scheduled and 

payable benefits

Non-interest Income

Payable benefits as percent

of scheduled benefits:

2018-34: 100%

2035: 80%

2093: 75%

Cost: Scheduled but not 

fully payable benefits

Expenditures: Payable benefits = income 

after trust fund depletion in 2035

Historical Estimated

• 80% of scheduled 

benefits still payable at 

trust fund reserve 

depletion

• Annual deficit in 2093 

is 4.11 percent of 

payroll — 0.25 percent 

smaller than last year
6

SUSTAINABILITY: Cost as Percent of GDP 

0%

2%

4%

6%

8%

10%

1990 2000 2010 2020 2030 2040 2050 2060 2070 2080 2090

Calendar year

Non-interest Income

Historical Estimated

Cost

• Rises from a 4.2-

percent average in 

1990-2008 to about 

5.9% by 2039

• Then declines to 

5.8% by 2052, and 

generally increases 

to 6.0% by 2093

• Stable shortfall
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Cost Increase Mainly Due to Aging (change in age distribution)

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 2019 TR

Population 65+/(20-64) 

Actual and TR Intermediate

TFR remains at 3.0 after 1964

TFR remains at 3.3 after 1964

• Largely due to drop 

in birth rates

• If birth rates had 

stayed at boom 

levels, cost would 

have risen little 

relative to payroll 

and GDP 

• But they haven’t 

and could be lower 

in the future
8

Central Birth Rates for Five-Year Age Groups

• How much of the 

decline since 2007 

was recession versus 

more persistent 

effects? 

• Will the tempo effects 

we have been 

assuming extend 

longer, as the recent 

Technical Panel 

suggested?
9

Mortality Experience: All Ages—Age-Sex Adjusted

700

750

800

850

900

950

1,000

1,050

1,100

1990 1995 2000 2005 2010 2015 2020

Age-Sex-Adjusted Death Rates

(Total, All Ages)

2017TR 2018TR 2019TR Actual

• Reductions continue 

to fall short of 

expectations

• We need to accept 

that gains from 

reduction in heart 

disease and growth in 

medical spending are 

in the past 
10

0%

1%

2%

3%

4%

5%

 1970-1980 1980-2010 2010-2040 2040-2070 2070-2090

Annual Percent Change in Medicare Cost per 

Beneficiary Relative to GDP per Worker-2019 TR

We cannot logically expect 

mortality declines to return to 

20th century rates...
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What Does Congress Need To Do To Eliminate Social 

Security’s Long-Term Underfinancing?

By 2035 (preferably sooner), Congress will need to:

• Lower cost (reduce benefits) by about one-fourth

• Increase revenues by about one-third

• Or some combination of these approaches

• Also consider benefit adequacy?
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If the Law is NOT Changed: Full Benefits Will Not Be 

Payable on a Timely Basis Starting in 2035

0

10

20

30

40

50

60

70

1960 1980 2000 2020 2040 2060 2080

PAYABLE Monthly Benefit Levels as Percent of Career-Average 

Earnings by Year of Retirement at age 62

Low Earner ($24,239 in 2019; 25th percentile)

Medium Earner ($53,864 in 2019; 56th percentile)

High Earner ($86,182 in 2019; 82nd percentile)

Max Earner ($132,900 in 2019; 100th percentile)

• Congress has 

never allowed a 

sudden drop like 

this to happen

• Highly doubtful it 

ever will
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Even if Scheduled Benefits are Fully Financed, and 

Retirees Wait Until 65, Will Benefits be Adequate ?

• DC plans have all 

but replaced DB 

plans, transferring 

longevity risk to 

individuals

• Annuities have 

become rare

0

10

20

30

40

50

60

70

1940 1960 1980 2000 2020 2040 2060 2080

Scheduled Monthly Benefit Levels as Percent of Career-Average 

Earnings by Year of Retirement at age 65

Low Earner ($24,239 for 2019; 25th percentile)

Medium Earner ($53,864 for 2019; 56th percentile)

High Earner ($86,182 for 2019; 82nd percentile)

Max Earner ($132,900 for 2019; 100th percentile)
Ways to Lower Cost

• Lower benefits for retirees—not disabled

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

• Can increase gradually, maintaining balance between work and retirement years, 

which would reduce long-range shortfall by about 20 percent

• Can exempt long-career low earners

• Lower benefits mainly for high earners

• Reduce PIA above some level

• Flatten the “benefit” level, making monthly benefits more progressive

• Note higher earners live longer, but become disabled somewhat less frequently

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

requirements

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Ways to Lower Cost (continued)

• Lower benefits mainly for the oldest old

• Reduce the COLA by using a chain-weighted CPI (reduces shortfall by 20%)

But lessens the ability of Social Security to offset declines in other income

• Some say instead raise the COLA by using the CPI-E (based on purchases of 

consumers over age 62) (increases the long-range shortfall by 14%)

• Increase number of years used in benefit calculation (currently 35)

• In conjunction with increasing NRA, assuming people work longer

• But hurts those who have gaps in work, or who cannot work to older ages

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Ways to Increase Revenue

• Raise tax rate on all earners

• Increasing rate from current 12.4 percent to about 15.3 percent is projected to 

completely eliminate the long-range shortfall

• Raise tax on highest earners

• Increase taxable maximum amount

• 83% of earnings below the max now, was 90% back in 1982-3

• Raising max to 90% again would eliminate over 1/4 of the long-range shortfall

• Eliminating the max (as for HI) would eliminate over 2/3 of the shortfall 

• Some tax on all earnings above the maximum (even if not the full 12.4 percent)?

• For each option, extra benefit credit? Or not?

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Ways to Increase Revenue (continued)

• Tax employer-sponsored group health insurance premiums 

(eliminates 1/3 of shortfall)

• The main form of employee compensation not now taxed

• Affects only middle class if taxable maximum is not increased

• Maintain larger trust fund reserves, and invest for higher return

• Could do this by investing some portion of reserves in equities

• Added interest/yield can lower needed taxes

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More Fundamental Changes

• “Privatize”: Partially or fully replace Social Security retirement 

benefits with personal accounts

• Means-test Social Security benefits

• Reduce benefits based on assets and/or total income

• Tax additional forms of income

• Investment income: like ACA approach

• Inheritance tax

• Value-added tax (VAT)

• Wealth

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Finally, Timing for Change

• Historically, Congress has waited until reserve depletion is 

imminent 

• Given uncertainties, difficult to lower benefits or raise taxes until 

you must

• Enacting “sooner” allows more options, more gradual phase in, 

and more advance notice

• Best example: 17-year delay in implementing NRA increase in 1983 amendments

• OASDI reserve depletion now projected for 2035

• The date has varied between 2029 and 2042 over the past 29 years

• So we may still have some time for study and careful consideration

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For More Information Go To 

http://www.ssa.gov/oact/

There you will find:

• The 2019 and all prior OASDI Trustees Reports, back to 1941

• Detailed single-year tables for recent reports

• Our estimates for comprehensive proposals

• Our estimates for the individual provisions

• Actuarial notes; including replacement rates

• Actuarial studies

• Extensive databases

• Presentations, like this one

• Congressional testimonies

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