Social Security Financing and Benefits:

Myths vs. Facts 

Steve Goss

Chief Actuary

Social Security Administration

DePaul University

February 21, 2024
What We Do at the Social Security 

Administration

• Administer Social Security—and Supplemental 

Security Income

• Provides income security for virtually all in the U.S. 

in the event of: 

– Becoming disabled, 

– Dying and leaving behind surviving family members, or

– Reaching old age (62 for Social Security, 65 for SSI)

• Providing a bridge to health care through Medicare 

and Medicaid

2
Role of the Office of the Chief Actuary

• Evaluate financial status of OASDI and SSI

– Project future population, workforce, employment, tax 

revenue, benefits, and (for OASDI) the status of trust funds 

• Projections for the President’s FY Budget and MSR

• Projections for Annual Trustees Report (OASDI)

– Board of Trustees: Treasury, HHS, DOL, SSA

• Projections for Annual SSI Report 

• Estimate effects of all changes considered for law 

and regulations by the Administration and Congress

3
First, A Few Facts 

About Social 

Security...

4
5

Social Security: What Does It Provide?

• Retirement and survivor monthly benefits started in 1940

– Never missed a payment!

• Eligibility age lowered from 65 to 62 in 1957 for women, 

1962 for men

– Full retirement age rises from 65 to 67 by 2022

• Disability benefits started in 1957

• Benefits rise with average wage across generations—

but with just CPI after eligibility

• Payroll taxes roughly pay-as-you go

– Rose from 2% to 12.4% as the system matured
6

Social Security: Who Pays, Who Benefits

WHO PAYS?

• 95% of workers contribute: 180 million in 2023

– 12.4% of earnings up to $168,600 (6 percent of workers earn more)

– 25% of state and local gov’t employees are not in Social Security

WHO BENEFITS?

• 67 million retirement, survivor, disability beneficiaries in 2023

– 53 million retirees and their dependent beneficiaries (spouses and children)

– Plus 6 million survivors

– Plus over 9 million disabled workers and their dependents

• About 160 million workers are insured against disability/death
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Social Security Financing

• Basically “pay-as-you-go” 

– Current workers provide for current beneficiaries

– Social Security cannot borrow

– Trust Fund securities provide a “contingency reserve”

• Current OASDI reserves (excess income) = $2.8 trillion

– Available to augment tax income as needed

– Roughly 2 times the annual cost of the program

• Reserves now projected to become depleted 

• In 2034, with continuing income covering 80% 

– Expect Congress to act—as it always has
Now, a Few Common Myths

1) Social Security is bankrupt, insolvent, running out 

of money, and COVID made it much worse

2) Increasing longevity and disability are the problem

3) The money in the trust funds has been spent

4) I should start benefits as soon as I can

5) My tax contributions have been saved up for me

6) Benefits scheduled in the law would be all I need

7) Social Security is responsible for the Federal debt

8) “Fixing” the Social Security shortfall will be hard

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Myth 1: Social Security Is Bankrupt, Insolvent, Running 

Out of Money, and COVID Made it Much Worse

Facts: 

a) Social Security cannot run out of money

b) Even if Congress allowed trust fund reserves to 

deplete...

• Continuing income would cover 80% of scheduled benefits in 2034

• And 74% of scheduled benefits in 2097

c) Over 80+ years, Congress has always acted timely

Scheduled benefits have always been paid in full

d) COVID being temporary has a modest effect

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OASDI Annual 

Cost and NonInterest Income as 

Percent of Taxable 

Payroll

Persistent negative annual 

cash-flow balance starting 

in 2010.

80 percent of scheduled 

benefits still payable at 

trust fund reserve 

depletion.

Annual deficit in 2097: 4.35 

percent of payroll: 0.09 

percent larger than last 

year.

10

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 2034

Payable benefits as percent 

of scheduled benefits:

2023-33: 100%

2034: 80%

2097: 74%

Historical Projected
SUSTAINABILITY: 

Cost as percent 

of GDP

Rises from a 4.2 

percent average in 

1990-2008, to a 

peak of about 6.3 

percent for 2076, 

and then declines to 

6.0 percent by 2097.

Future non-interest 

income is 4.5 

percent of GDP.

11

0%

1%

2%

3%

4%

5%

6%

7%

8%

1990 2000 2010 2020 2030 2040 2050 2060 2070 2080 2090 2100

Calendar Year

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

Historical Projected

Cost

Non-interest Income
Myth 2: Increasing Longevity and 

Disability Are the Problem

Facts: 

a) The age distribution of the population is the most 

important factor in Social Security cost

 - Population “aging” through 2035 is mainly due to birth rates 

b) Shifting earnings levels have reduced income

c) Disability costs have matured, and are dropping

12
Aging –

Change in Age 

Distribution

The primary reason for 

increasing cost relative 

to payroll and GDP. 

Mainly due to drop in 

birth rates.

13

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 2023 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
Birth Rates

Average Total Fertility 

Rate falls from 3 to 2

14

0

1

2

3

4

5

6

1865 1875 1885 1895 1905 1915 1925 1935 1945 1955 1965 1975 1985 1995 2005 2015

U.S. Total Fertility Rate: With and Without Adjustment for Survival to Age 10 

TFR Adjusted TFR

Notes: TFRs prior to 1917 are for whites only and survival rates prior to 1900 use Massachusetts data 

1865-1895 4.44 3.09

1896-1925 3.36 2.80

1926-1965 2.86 2.71

1966-1990 1.99 1.95

1991-2021 1.94 1.93

Average

TFR

Average

Adjusted TFR
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.

15
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

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• But the depth of 

the 2007-09 

recession and slow 

recovery further 

reduced expected 

trust fund 

accumulation 

through 2019
Another Reason: 

Ratio of Taxable 

Earnings to All 

OASDI Covered 

Earnings

Declined since 1983 due 

to increasing 

concentration of earnings 

at the top of the 

distribution, particularly 

through 2000.

Between 1983 and 2000, 

the top 6% of earners 

increased annual real 

earnings by 62%. The rest 

of workers saw only a 17% 

increase

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0.8

0.82

0.84

0.86

0.88

0.9

1984 1988 1992 1996 2000 2004 2008 2012 2016 2020 2024 2028 2032 2036 2040

Taxable Ratio 2023 TR

Historical Projected
Disability 

Incidence Rate 

Also 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 postCOVID conditions? 

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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
Fewer Disabled 

Worker 

Beneficiaries

Fewer now and in near 

term based on recent 

applications and 

incidence rates, with 

assumed increases 

deferred another year.

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6,000

7,000

8,000

9,000

10,000

11,000

2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030 2032

Calendar Year

Disabled Worker Beneficiaries

In Current Payment Status at End of Year (in thousands)

2008 TR (no recession)

2022 TR

2023 TR
Myth 3: The Money in the Trust Funds 

Has Been Spent

Facts: 

a) Every dollar of income is invested by law in interestbearing securities backed by the full faith and 

credit of the United States

• These are not “worthless IOUs”!

b) Securities are issued at market yield rates

c) Securities held by the Trust Funds have always been 

honored, as have all other Treasury issues

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Myth 4: I Should Start Benefits As Soon 

As I Can

Facts: 

a) Social Security retirement benefits are designed to 

provide about the same lifetime value regardless of 

when you start, on average 

b) When to start is personal—you might want to wait if 

you are in average or better health

c) If you delay by working or using other assets, Social 

Security increases your monthly life annuity 

payments, but you will receive them for fewer months!

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Myth 5: My Tax Contributions Have 

Been Saved Up for ME

Facts: 

a) Social Security is a “social contract”

b) Basically, benefits paid today are financed from 

contributions by recent workers

c) This is why the age distribution of the population is 

fundamental—the workers of the day share with the 

retirees, survivors, and disabled of the day

d) This is true for advance-funded systems as well

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Myth 6: Benefits Scheduled in the Law 

Would Be All I Need

Facts: 

a) Recall the 3-legged stool: 75-80% in retirement

b) Social Security provides about 40% of careeraverage earnings (varies from 25% to over 80%)

c) So the other legs of the stool—personal savings and 

private pensions—are needed

d) But increasingly, Social Security is the primary 

source of lifetime income

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24

Three-Legged Stool: Basis for 

Retirement Planning

Common wisdom—aim for 75-80 percent replacement rate

Retirement Income

Social 

Security
Replacement 

Rates Based on 

the 2023 TR

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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 2100

Calendar Year

Scheduled Monthly Benefit Levels as Percent of Career-Average 

Earnings by Year of Retirement at age 65

Low Earner ($29,766 for 2023; 24th percentile)

Medium Earner ($66,147 for 2023; 56th percentile)

High Earner ($105,835 for 2023; 81st percentile)

Max Earner ($160,200 for 2023; 100th percentile)

Historical Projected
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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 2100

Calendar Year

PAYABLE Monthly Benefit Levels as Percent of Career-Average Earnings 

by Year of Retirement at age 65

Low Earner ($29,766 for 2023; 24th percentile)

Medium Earner ($66,147 for 2023; 56th percentile)

High Earner ($105,835 for 2023; 81st percentile)

Max Earner ($160,200 for 2023; 100th percentile)

Historical Projected
Defined Benefit Plans Replaced by DC Plans 

And lump sum options increasing for DB plans

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0%

10%

20%

30%

40%

50%

60%

197919801981198219831984198519861987198819891990199119921993199419951996199719981999200020012002200320042005200620072008200920102011201220132014

Private-Sector Workers Participating in Employment-Based Retirement 

Plans, by Plan Type, 1979-2014

Defined Benefit Total Defined Contribution Total

Both Either

Source: U.S. Department of Labor Form 5500 Summaries 1979-1998, Pension Benefit Guaranty Corporation,

Current Population Survey 1999-2013, EBRI estimates 1999-2014.
Myth 7: Social Security Is Responsible 

for the Federal Debt

Facts: 

a) OASI, DI, HI Trust Funds do not add to the debt

b) In fact, these trust funds finance part of the debt

c) If trust fund reserves are ever depleted, the 

programs cannot borrow

d) Thus, the common “budget scoring convention” is 

misleading and inconsistent with the law

28
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So—What If We Project Federal Debt Consistent 

With the Law? Projection to 2090 Back in 2015

Now CBO only projects debt 30 years (to 2053)

0

20

40

60

80

100

120

140

160

180

200

2000 2010 2020 2030 2040 2050 2060 2070 2080 2090

Publicly Held Debt as a Percentage of GDP

Projected Federal Debt Held by the Public: CBO Baseline (Assuming OASDI 

& HI Unfunded Obligations Are Paid by Borrowing From the Public) vs. 

Assuming Current Law 

CBO Baseline July 2015

Less OASDI Unfunded Obligations (CBO Dec 2015)

Less OASDI (CBO Dec 2015) and HI (Trustees 2015)

Unfunded Obligations
Myth 8: “Fixing” the Social Security 

Shortfall Will Be Hard

Facts: 

a) Need to adjust the benefits or revenue given the shift 

in the age distribution

b) By 2034, lower scheduled benefits by 1/4, or raise 

revenue by 1/3, or some combination

c) Question: what do the American people want?

d) Many options are already under consideration

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Some Ways to Lower Cost 

• Lower benefits for retirees—not disabled?

– Increase normal retirement age (lowers OASDI cost, but 

increases DI cost)

– Can exempt long-career low earners (Simpson Bowles 2010)

• 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, using the “chain-weighted C-CPI-U

– But some say increase it with the CPI-E (based on purchases of 

consumers over age 62)

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Some Ways to Increase Revenue 

• Raise the 12.4 percent OASDI payroll tax rate?

• Raise tax on highest earners?

– Increase taxable maximum amount, to tax 90% of earnings?

– Or tax on all earnings above the current maximum

• Take advantage of returns on investments  Invest trust fund reserves as suggested by Kerrey/Simpson 1995 

proposal and Ball in 1994-96 Advisory Council 

 Or tax investment returns as in the 2010 ACA and in many 

proposals since

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For More Information Go To

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

• There you will find:

– All OASDI Trustees Reports: 1941-2023

– 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

– Congressional testimonies

– Presentations by OCACT employees

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