PROJECTION OF RETIRED 

WORKERS

Office of the Chief Actuary

Social Security Administration

April 12, 2019

Technical Panel

Washington, DC
Projection of Retired Workers

 Compute by multiplying the SSA population 

age 62+ by a series of probabilities of the 

conditions a person must meet to receive 

retired worker benefits

 Probability primary account holder is fully insured

 Probability primary account holder is not receiving 

widow(er) or disabled-worker benefit

 Retired Worker Prevalence rate

2
Age 62 Prevalence Rate

 Historical age 62 prevalence rates follow an inverse 

relationship with

 Labor force participation rates (LFPR) at age 62 and

 Increases in the normal retirement age (NRA).

 We assume this relationship holds for the projection 

period and calculate a regressed prevalence rate 

based on the projected LFPR and the number of 

months to NRA.

 Calculate prevalence rates on a cohort basis.

3
Male Regressed Prevalence Rates

4
Female Regressed Prevalence Rates

5
Age 63-69 Prevalence Rates

 Assume retirement decision is solely influenced by the expected 

change in the portion of PIA that is payable at each age 

relative to the potential change after initial eligibility.

 This is based on NRA, delayed retirement credits, and actuarial 

reduction factors.

 Age 63-69 prevalence rate = the age 62 prevalence rate for 

that cohort + an estimate for those who have not retired yet, 

that they will retire at that age.

 To capture recent claiming trends, apply an adjustment for the 

difference between historical and estimated prevalence rates.

6
Male Retired Worker Prevalence

7
Female Retired Worker Prevalence

8
Projected Retired Worker Prevalence

(Long-Range Model)

9
Projected Retired Worker Prevalence

(Long-Range Model)

10
Implications of Benefit Start Ages

 The actuarial reduction factors and 

delayed retirement credits were set so 

lifetime benefits were actuarially 

equivalent, on average, no matter when 

one chooses to receive benefits. 

We review the benefit factors every year.

11
More Information

• 2018 OASDI Trustees Report

http://www.ssa.gov/OACT/TR/2018/tr2018.pdf

• Model Documentation

http://www.ssa.gov/OACT/TR/2018/2018_LR_Model_Documentation.pdf 

Pages 223-227

12
BENEFIT LEVEL 

METHODOLOGY 

Office of the Chief Actuary

Social Security Administration

April 12, 2019

Technical Panel

Washington, DC
Overview

 Construction of Historical Sample

 Projection Methodology

 Further Calculations of Average Benefits

 Potential Improvements

 More Information

14
Construction of Historical Sample

• 10 percent sample of initial entitlements in a given 

year (2015 for 2018TR) – about 229,000 retired 

worker and 59,000 disabled workers

• Ages 20 through 65 for disability

• Ages 62 through 70 for retired workers

• 2 year lookback

• That is, for 2015 sample, as of December 2017 those 

with recorded initial entitlement in year 2015

• Must not be in recorded death status as of December of 

the sample year (December 2015 for 2015 sample)

• Allows for retroactive claims

15
Projection Methodology

Basics using 10% Sample

• For each projection year, the historical sample stands in for 

those initially entitled in the given year

• Three main adjustments to historical earnings

1) Adding or removing earnings based on changes in 

economy-wide covered worker rates

2) Changes in relative taxable maximum levels over time

3) Changes in earnings levels

• Computation of AIME and Potential AIME Percentages (PAPs)

• “Shuttling Method”

16
Adding or Removing Earnings

• Based on changes in economy-wide covered worker 

rates from historical year to projected years of 

earnings, methodology

• Economy-wide covered worker rates = “legal” covered 

workers / “legal” population

• For increases in economy-wide covered worker rates, adds 

positive earnings to replace historical zero earnings years

• For decreases in economy-wide covered worker rates, 

zeroes out earnings to replace historical years with positive 

earnings

• Done by 5-year age groups for disabled workers and 

retired workers 

17
Adding or Removing Earnings: Results

18

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

35+ years 40+ years 45+ years

Percentage of Retired Workers by Number of Earnings Years 

for Initial Entitlements in Given Year

2015 male 2015 female 2050 male 2050 female
Adding or Removing Earnings

Adjustments to basic methodology

• Fully insured rate change from historical to projected year (retired workers)

• Conceptually reflects that increases in percentages of those qualifying for 

benefits would increase in proportion to sample with relatively few earnings 

years and therefore lower overall added earnings years

• Disabled worker differences

• Separate adjustments in sample covered worker rates by 5-year entitlement 

age group

• Projected distribution by earnings years for female retired workers

• With general increases in female sample covered worker rates, want to keep 

some cases at lower number of earnings years (e.g., 10 to 15 earnings years)

19
Changes in Relative Taxable Maximum Levels 

Why Does This Change Need to Be Done?

• “Taxable maximum” = Contribution and Benefit Base ($132,900 for 2019)

• Employee/employer combined payroll tax rate of 12.4 percent applied on 

earnings up to taxable maximum

• Since 1981 taxable maximum values have mostly been computed with 

same methodology and increased by the SSA average wage index

• Before 1981 is different story

• Ad-hoc increases through 1937-1974 and 1979-1981 (set by statute)

• Result is that taxable maximum did not increase by average wage index 

for these years (typically covered a lower portion of earnings than post1981)

• Taxable maximum could be markedly different for later projection 

years

20
Changes in Relative Taxable Maximum Levels 

How Are Earnings Adjusted?

• Set “hypothetical wage base” for each earnings year for a given projection 

year (what historical earnings year e.g., 1965 would look like for projection 

year in question e.g., 2005 for 2055 retiree) 

• Generally higher than historical tax max for 1974 or earlier

• Compute earnings on a record-by-record basis as if there were no taxable 

maximum, if earnings at tax-max (covered earnings) based on available 

data 

• Final result: Set earnings at lower of covered earnings or hypothetical 

wage base

21
Changes in Earnings Levels

• Last step in earnings adjustment process

• Main idea: Reflect more recent earnings distributions by age and sex in 

assigning targeted future earnings levels by age and sex

• First compute preliminary projected average taxable earnings (ATE) levels 

by age, sex, earnings year after application of the first 2 adjustments 

discussed (changes in covered worker rates, tax max adjustments)

• Second, compute “targeted ATE” by age, sex, earnings year

• Third, adjust preliminary ATE level up or down to match targeted ATE

22
Calculation of Potential AIME Percentages

• After adjusting earnings levels for covered worker rate 

changes, tax max changes, and earnings level changes, 

compute an Average Indexed Monthly Earnings” (AIME) for 

each record with projected year earnings 

• Segment the AIME into 30 intervals (smaller at lower AIME levels and 

larger for higher AIME levels) 

• Compute potential AIME percentages (PAPs) by percent of AIME for a 

given record that falls into each subinterval

• Average the PAPs by age/sex/Trust Fund as input file to compute initial 

entitlement PIAs 

23
“Shuttling Method”

• Distribution of retired workers by age of retirement can vary widely 

between historical pattern from initial entitlement sample year and 

pattern for projected years 

• The “shuttling method” is an algorithm to have AIMEs (PAPs) from one 

age in the historical sample represent a different age for a given 

projected year

• Generally shuttling is from an earlier retirement age to a later 

retirement age but “backward shuttling” in projections does rarely 

occur

• When shuttling to a later retirement age, earnings are potentially 

added based on projected sample covered worker rate at that age 

with a resulting recomputed AIME 

• Any earnings are taken away for backward shuttling

24
Average Benefit Calculations

• Using Potential AIME Percentages, we compute PIAs by 

age/sex/Trust Fund with appropriate bend points, indexing 

years, and COLAs for the projection year

• Convert from PIAs to benefit amounts – major items considered

• Actuarial reduction factors / delayed retirement credits for age 

at entitlement for retired workers

• Windfall Elimination Provision (WEP) for retired workers 

• Workers’ compensation offset (WC) for disabled workers

25
Average Benefit Calculations

26

0 0.2 0.4 0.6 0.8 1 1.2 1.4

62

63

64

65

66

67

68

69

70

Initial Entitlement PIA Levels for 2050 Relative to Average by Sex

Female Male
Dual Entitlement

• Workers with excess auxiliary benefit (most typically, retired 

workers with a higher widow(er) or aged spouse benefit) 

• About 7.2 million dually entitled retired workers as of December 2017

• 10% sample just projects worker benefit 

• Separate methodology in place to project number of dually 

entitled beneficiaries and average excess benefit amount 

• Estimate an “ultimate” value for each beneficiary type (used for 75th

projection year)

• Grade in to “ultimate” value using regression with reasonable 

adjustments

27
Dual Entitlement

• Historical vs Ultimate Comparison of Major D/E Categories

28

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

Wife Widow 62-74 Widow 75-84 Widow 85+

Historical and Ultimate % of Retired Workers in Marital Status Who are Dually 

Entitled

2017 Ultimate Value (2092)
Post Entitlement

• After initial entitlement, aggregate average benefits change due to 2 main 

factors beyond the COLA:

• Mortality differentials by benefit level

• Earnings after entitlement causing a benefit recomputation and possibly a higher 

PIA

• We compute “post-entitlement” factors to account for benefit differentials 

after initial entitlement

• 10 sets of consecutive year comparisons of historical data of those in-currentpay in the later year, and also in-current-pay in the previous year

• Initial post-entitlement factors with most recent 3-year historical average

• Ultimate post-entitlement factors using most recent 10-year historical average 

• Retired workers done by sex and duration from entitlement 1 years, 2 years,..., 

to 12+ years

• Disabled workers done by sex and duration 1, 2,..., 9+ years and separately 

for under 50 and 50+

29
Post Entitlement

Results

• For almost all durations for retired workers, higher benefits 

after entitlement beyond COLA

• For disabled workers, generally higher benefits after 

entitlement but can be lower than COLA at earlier durations

• “Ultimate” effects at 12+ duration for retired workers and 

9+ for disabled workers

• About 0.3% per year for retired workers not previously disabled

• About 0.2% per year for retired workers previously disabled and 

disabled workers

• For retired workers, roughly half the post-entitlement 

increase is due to mortality differentials by benefit level

30
Potential Improvements

• Dispersion in earnings levels for 10% sample

• If more earnings inequality, then relatively more AIME would 

be in the 15% benefit factor and relatively less in the 

90/32% factors for lower earners

• Leads to lower average benefits

• Increase in sample size (more than a 10% sample) – earlier 

work shows variation within separate 1% samples

• Multiple initial entitlement samples from different years to 

minimize variation when updating for new data

31
More Information

• 2018 OASDI Trustees Report

http://www.ssa.gov/OACT/TR/2018/tr2018.pdf

• Model Documentation

http://www.ssa.gov/OACT/TR/2018/2018_LR_Model_Documentation.pdf 

Pages 256 on.

32
Appendix

Adding or Removing Earnings: Example

Project sample covered worker rates for 40-44 age group for retired workers in 2035 

for increase in economy-wide rates

• Individuals in 2015 sample year are aged 40-44 in 1985-1997 historically 

(retirees born 1945-1953)

• Individuals in 2035 projection year are aged 40-44 in 2005-2017

• Calculation: if increase in economy-wide rates over time, projected sample covered 

worker rate = 

• Sample covered worker rate + (1 – sample CWR) * (projected economy-wide 

rate - historical economy-wide rate)/(1– historical economy-wide rate)

• Given:

• Sample covered worker rate aged 40-44 = .8

• Economy-wide covered worker rate aged 40-44 in 1985-1997 = .75

• Economy-wide covered worker rate aged 40-44 in 2005-2017 = .85

• Projected sample-covered worker rate = .8 + .2 * (.85-.75)/(1-.75) = .88

• Therefore would add earnings for zero earnings cases every 2 out of 5 cases (.88-

.80)/(1-.8)

33
Appendix

Adjusting Earnings Levels—More Information

• Targeted ATE = Sample ATE by sex, age, historical earnings year * adjustment 

ratio

• Example for earnings for female at age 40 for worker retiring at age 65 in 

2030

• Given: sample ATE = $17,441 for age 40 in 1990 (retire 2015)

• Given: projected “economy-wide” ATE for female age 40 in 2005 (retire 2030) = 

$29,831

• Given: historical “economy-wide” ATE at age 40 in 1990 (retire 2015) = $17,326

• The ratio of wage-indexed back to 1990 for year 2005 = .5691 

($21,028/$36,953) 

• Projected ATE in historical dollar 1990 = $16,976 ($29,831 * .5691) 

• Therefore, adjustment ratio = $16,976 projected economy-wide ATE (40 in 2005) in 

1990 dollars / $17,326 historical economy-wide ATE at age 40 = 0.9798

• Targeted ATE = Sample ATE * adjustment ratio = $17,089 ($17,441 * .9798)

34