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Illustrating Uncertainty for US Social 

Security Projections

Steve Goss, Chief Actuary

Karen Glenn, Deputy Chief Actuary

Social Security Administration, USA
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Outline

Background

Uncertainty Illustrations

Examples of Unexpected Outcomes
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Background
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Nature of the Social Security Program in the United States

 Provide basic benefits for retirement, disability, and survivors

 Floor of protection—to be augmented with employer benefits and/or savings

 Employer “defined benefit” plans have been replaced with “defined 

contribution” plans—“de-risking” for employers

 Financing and actuarial status

 Financing primarily from payroll tax of 12.4% on up to $160,200 in 2023

 Benefits based on career-average earnings level “wage-indexed” to eligibility

⎯ Indexed by price increases after initial eligibility

 “Pay as you go” financing dependent on workers per beneficiary
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Office of the Chief Actuary’s Core Policy and Analytical Functions

 The Office of the Chief Actuary (OCACT) develops analysis of and projections 

for actuarial status for the US Social Security Old-Age, Survivors, and 

Disability Insurance (OASDI) program

 Annual reports on current-law status since 1941 for the Board of Trustees

 Semiannual projections for President’s Budget

 OCACT works with policymakers on developing potential changes and 

estimating effects

 Changes in law to improve “solvency” of the program—increase revenue or reduce 

benefits

 Changes in regulations to modify implementation of current law
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Baseline (Current-Law) Long-Term Assumptions and Projections

 OCACT develops assumptions and proposes them to the Board of 

Trustees

 Subject to approval by the Trustees

 Actuarial opinion required in the report attesting to “reasonableness”

 OCACT develops methods for projections

 We use multiple models

⎯ Macro (deterministic) 

⎯ Stochastic

⎯ Microsimulation
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The Current Financial/Actuarial Status of the OASDI Trust Funds

Cost is rising as a percent of payroll from 2008 to 2035, mainly due to birth rates affecting 

the population age distribution
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Uncertainty Illustrations
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Why Is Showing Uncertainty Important?

 Projecting into the future is hard!

 Understanding that changes in law to address inadequate financing 

will generally be based on the “best estimate” projection

 It is important that policymakers and the public understand that future 

experience will never match projections exactly, and they should plan 

accordingly
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Illustrations of Uncertainty for the Future

 Three main ways uncertainty is illustrated in the annual reports:

 Alternative scenarios—intermediate (best estimate), low-cost, and high-cost

 Stochastic projections—5,000 simulations reflecting randomly assigned annual 

values and central tendencies for key parameters

 Sensitivity analysis on key individual assumptions—for example, fertility, 

mortality improvement, and real wage growth

 The next few slides show selected examples of results presented in 

the annual reports
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Alternative Scenarios

 Under alt II (best estimate), the 

OASI Trust Fund reserves are 

projected to become depleted in 

2033 (in 2039 for alt I and 2031 

for alt III)

 The DI Trust Fund is adequately 

financed through 2097 and 

beyond under alt II and alt I

 The combined OASI and DI 

Trust Fund reserves would 

become depleted in 2034 under 

alt II and in 2031 under alt III

Figure IV.B1.—Long-Range OASI and DI Annual Income Rates and Cost Rates

[As a percentage of taxable payroll]
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Stochastic Projections

 The fluctuation of each key 

variable is simulated using 

historical data and standard 

time-series techniques

 Incorporates variation in the 

central tendency of each 

variable

 The range of outcomes for 

program cost in the 95-percent 

confidence interval is very close 

to the range for the three 

alternative scenarios

Figure VI.E3.—OASDI Cost Rates: Comparison of Stochastic to Low-Cost, 

Intermediate, and High-Cost Alternative Scenarios

[As a percentage of taxable payroll]
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Sensitivity Analysis

 The intermediate 

assumption for the total 

fertility rate averages 1.99 

children per woman in 2033 

through 2097

 Increasing this assumption 

by 0.20 percentage point or 

reducing it by 0.30 

percentage point has large 

effects on the 75-year 

actuarial balance measure

 But larger effects on the 

annual balance for the 75th

projection year, 2097
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Examples of Unexpected Outcomes
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Examples of Unexpected Outcomes due to Past Uncertainty

1. Since 2009, mortality decline has slowed substantially

 And the COVID-19 pandemic has greatly affected uncertainty for the future

2. Since 2010, disability incidence rates have declined substantially 

 Uncertainty is increased with the changing nature of work

3. While lower birth rates were well understood by 1983, economic 

developments after 1983 were unanticipated and substantially 

affected the actuarial status of the OASDI program
1. Mortality 

Experience: 

Ages 65+

Increased mortality in the 

near-term to reflect the 

effects of the COVID-19 

pandemic.

What will the net effect of 

the pandemic be on 

mortality in the future?

We assume offsetting 

effects for the residual 

population after the 

pandemic, around 2025.

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2. Disability 

Incidence Rate 

Remains 

Historically Low

DI disabled worker 

incidence rate rose sharply 

in the 2008 recession and 

has declined since the 

peak in 2010 to 

extraordinarily low levels in 

2016 through 2022.

What will be the NET effect 

of COVID and post-COVID 

conditions? 

2.5

3.0

3.5

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 2023 Trustees Reports

2012TR

2013TR

2014TR

2015TR

2016TR

2017TR

Average 1990-2022 5.0

Ultimate Assumption 4.8

2018TR

2019TR

2020TR

2021TR

2022TR

2023 TR

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3. After the 1983 Amendments (Last Major Program Changes), 

the 1983 Trustees Report Projected Reserve Depletion in 2063

 Lower birth rates were anticipated in 1983, and mortality projections 

were extremely accurate

 Over 80% of worsening in projections since 1983 Trustees Report was 

due to unanticipated economic experience

 Redistribution of earnings from 1983 to 2000 reduced taxable payroll, 

and payroll tax revenue, by 8%

 Depth of 2007-09 recession and slow recovery reduced employment 

and tax revenue
Earnings 

“Dispersion” 

Between 1983 and 

2000 Lowered the 

Percent of 

Earnings Taxable 

from 90% to 82.5%

Overall, average 

earnings increased 

more than expected, but 

real growth was 62% for 

the top 6% of workers, 

while only 17% for lower 

94% of workers.

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The Reduced Share of Earnings Subject to Payroll Tax Explains Most of the 

Increase in Cost as Percent of Payroll, Compared to the Projection in 1983

 But the depth of 

the 2007-09 

recession and 

slow recovery 

further reduced 

expected trust 

fund accumulation 

through 2019
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For More Information, Go To: www.ssa.gov/OACT/

There you will find:

 The 2023 and all prior OASDI Trustees Reports

 Detailed single-year tables for recent reports

 Our estimates for comprehensive proposals and individual provisions

 Actuarial notes and studies

 Extensive databases

 Congressional testimonies

 Presentations by OCACT employees
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Q & A
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