Social Security Financing and Status:

Implications of COVID-19 

Steve Goss

Chief Actuary

Social Security Administration

DePaul University

March 2, 2021
2

Three Legged Stool: Basis for 

Retirement Planning

Common wisdom—aim for 75-80 percent replacement rate

Retirement Income

Social 

Security
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.
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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
Scheduled 

Benefit 

Replacement 

Rates Based 

on the 2020 

Trustees 

Report 

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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

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
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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

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
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Social Security: Who Pays, Who Benefits

WHO PAYS?

• 95 percent of workers contribute—177 million in 2020

– 12.4% of earnings up to $142,800 in 2021 (6 percent of workers earn more)

– 25% of state and local government employees are not in Social Security

WHO BENEFITS?

• 65 million retirement, survivor, disability beneficiaries in 2020

– 46 million retirees, plus another 3 million of their spouses and children

– Plus 6 million survivors

– Plus 9 million disabled workers and their dependents

• And 156 million workers are insured against disability or death
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Social Security Financing

• Basically “pay-as-you-go” 

– Current workers provide for current beneficiaries

– Trust Funds are “contingency reserve” because CANNOT borrow

– Total spending to date cannot exceed income to date

• Current OASDI reserves (excess income) = $2.9 trillion

– Available to augment tax income as needed

• Reserves projected to deplete in 2034* under current law

– Expect Congress to act—as it always has

* Per OCACT update of 2020 Trustees’ baseline (11/24/20)
First, Social Security 

Actuarial Status under 

2020 Trustees Report

DEVELOPED PRIOR TO RECOGNITION OF THE 

PANDEMIC AND RECESSION
Solvency: OASDI 

Trust Fund 

Reserve Depletion 

in 2035 (same as last 

year)

Reserve depletion date 

varied from 2029 to 2042 in 

reports over the past 30 

years (1991-2020).

DI Trust Fund – reserve 

depletion in 2065, thirteen 

years later than last year.

Due largely to low recent 

and near-term disability 

applications and awards, 

and an assumed lower 

ultimate disability incidence 

rate.

10

0%

50%

100%

150%

200%

250%

300%

350%

400%

450%

1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050 2055 2060 2065

Calendar Year

Social Security Trust Fund Ratios

Assets as a Percent of Annual Cost

Trustees Report Intermediate Projections

2020 TR DI

2019 TR DI

2020 TR OASI

2019 TR OASI

2020 TR OASDI

2019 TR OASDI

Historical Projected

Tax Rate

Reallocation
OASDI Annual 

Cost and NonInterest Income as 

Percent of Taxable 

Payroll

Persistent negative annual 

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

11

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.

12

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
Why Cost Rises 

Between 2008 

and 2035 as 

Percent of Payroll 

and GDP:

Aging - Change in 

Age Distribution

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 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
COVID-19 Effects on 

Social Security Actuarial 

Status

UPDATE TO 2020 TRUSTEES REPORT : 

“SUBSEQUENT EVENT” FOR AUDIT
For 2020, Subsequent Event Unprecedented 

1) COVID-19 not reflected in the 2020 Trustees Report

– Report issued in April, but assumptions were determined before 

pandemic was declared by the WHO in March

2) OCACT developed modifications to the 2020 TR 

assumptions in September/October per requirement by 

the auditors

3) Reflected experience and expectations at that time

4) Significant effects that caused us to indicate that 

evaluation of “solvency” proposals prior to the 2021 TR 

would be evaluated on the basis of the updated baseline 

https://www.ssa.gov/OACT/solvency/UpdatedBaseline_20201124.pdf

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Characteristics of COVID-19

• Highly communicable

• Transmissible prior to symptoms

– Many never show symptoms

• Immunity after infection may be limited

– Less than 12 months?; implications for “herd immunity”

– Potential for repeated reinfection?

• Death rate overall 0.4% to 1%: proportionate increase across 

ages 25 and over

• Compromise for survivors?

• Increasing mutations—vaccine or therapy? How effective?
Potential Path Going Forward

1918: worst case scenario? Will we do much better in 2021?

• Will we avert a 

substantial 

additional wave in 

2021? If so, we 

may be able to 

return to “normal” 

by the end of the 

year

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Source: The Spanish Flu and the Stock Market: The Pandemic of 1919

by Bryan Taylor | Feb 27, 2020 | Economics, Historical, Insights

Figure 1. Death Rates of the Spanish Flu, June 1918 to May 1919
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Implications of COVID-19 for Changes in OASDI

• Over the long-range period, likely minor

– The pandemic-induced recession may be largely recovered by 2023 

with little permanent effect

– Note that Trustees Reports have incorporated the likelihood of 

periodic negative events

• Specifically, Trustees Report ultimate mortality decline has been assumed to be 

at around 0.73 percent on average; others have persistently assumed 1.0 

percent or higher in the long term with no deceleration

• The Trustees Reports have also assumed long-term unemployment rates will 

be higher on average than “forecasters”, reflecting occasional downturns

• However, there are near-term considerations
2020 Subsequent Event Changes: Demographic

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Assumption/measure 2020 2021 2022 2023 2024 2025

Fertility (TFR)

2020 TR 1.69 1.70 1.73 1.77 1.82 1.87

Subsequent event 1.69 1.57 1.66 1.83 1.88 1.93

Difference 0.00 -0.13 -0.07 0.06 0.06 0.06

Mortality (age-sex-adjusted central death rate)

2020 TR 790.4 784.9 779.2 773.2 767.1 760.9

Subsequent event 885.2 832.0 794.8 773.2 767.1 760.9

Difference 94.8 47.1 15.6 0.0 0.0 0.0

Net LPR immigration (levels in thousands)

2020 TR 788 788 788 788 788 788

Subsequent event 428 428 1,028 1,028 1,028 788

Difference -360 -360 240 240 240 0

Net other-than-LPR immigration (levels in thousands)

2020 TR 631 614 597 586 576 567

Subsequent event -449 -442 1,366 1,339 1,312 564

Difference -1,080 -1,056 769 753 736 -3
2020 Subsequent Event Changes: Disability

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Assumption/measure 2020 2021 2022 2023 2024 2025

Disability incidence (age-sex-adjusted rate per thousand exposed)

2020 TR 4.34 4.18 4.25 4.53 4.77 4.80

Subsequent event 3.87 4.52 4.53 4.57 4.70 4.81

Difference -0.47 0.34 0.28 0.04 -0.07 0.01

Disability termination (age-sex-adjusted rate per thousand beneficiaries)

2020 TR 41.31 39.16 38.56 38.04 37.51 36.90

Subsequent event 42.79 40.64 39.05 38.04 37.51 36.90

Difference 1.48 1.48 0.49 0.00 0.00 0.00
2020 Subsequent Event Changes: Economic

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Assumption/measure 2020 2021 2022 2023 2024 2025

Productivity, total US economy (annual percentage change)

2020 TR 1.26 1.99 1.86 1.67 1.62 1.63

Subsequent event 3.20 1.77 0.76 0.67 1.22 1.46

Difference 1.94 -0.22 -1.10 -1.00 -0.40 -0.17

Average wage in covered employment (annual percentage change)

2020 TR 3.50 4.44 4.09 3.83 3.78 3.81

Subsequent event -4.33 8.23 5.99 3.17 3.45 3.66

Difference -7.83 3.79 1.90 -0.66 -0.33 -0.15

CPI-W (annual percentage change)

2020 TR 2.27 2.43 2.40 2.40 2.40 2.40

Subsequent event 1.23 1.65 2.05 2.36 2.40 2.40

Difference -1.04 -0.78 -0.35 -0.04 0.00 0.00

Real-wage differential (percent)

2020 TR 1.23 2.01 1.69 1.43 1.38 1.41

Subsequent event -5.56 6.58 3.93 0.80 1.05 1.26

Difference -6.79 4.57 2.24 -0.63 -0.33 -0.15

Unemployment rate (percent)

2020 TR 3.8 4.2 4.6 5.0 5.0 5.0

Subsequent event 8.3 6.5 5.2 5.0 5.0 5.0

Difference 4.5 2.3 0.6 0.0 0.0 0.0
2020 Subsequent Event Changes: Economic, cont.

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Assumption/measure 2020 2021 2022 2023 2024 2025

Total employment, military and civilian (annual percentage change)

2020 TR 0.9 0.3 0.3 0.4 0.6 0.5

Subsequent event -6.4 3.0 3.2 2.0 1.0 0.7

Difference -7.3 2.7 2.9 1.6 0.4 0.2

Real GDP (annual percentage change)

2020 TR 2.1 2.3 2.2 2.1 2.1 2.1

Subsequent event -3.5 4.7 3.9 2.7 2.1 2.1

Difference -5.6 2.4 1.7 0.6 0.0 0.0

Trust fund new-issue real interest rate (percent)

2020 TR 0.0 -0.1 0.5 0.9 1.2 1.6

Subsequent event 1.0 -0.6 -0.8 -0.7 -0.2 0.4

Difference 1.0 -0.5 -1.3 -1.6 -1.4 -1.2

Average wage index

2020 TR 55,641.66 58,112.16 60,499.07 62,823.60 65,207.33 67,697.32

Percent change from prior year 3.51 4.44 4.11 3.84 3.79 3.82

Subsequent event 51,603.14 55,788.36 59,076.46 60,918.68 62,996.21 65,290.06

Percent change from prior year -4.01 8.11 5.89 3.12 3.41 3.64
SOLVENCY: OASDI Long-Range Actuarial Deficit Increased by 0.07 Percent of Payroll

o Reserve depletion date varied from 2029 to 2042 in reports over the past 30 years 

o For OASDI and OASI, 2034 and 2033, one year earlier than 2020 Trustees Report

o For DI, 2059, six years earlier than the 2020 Trustees Report

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

Persistent Negative Annual Cash-Flow Balance Starting in 2010 

Both rates higher for update in 2020 ONLY because of lower payroll
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Average Wage Index (AWI): “Notch” and “Boost”

• The AWI declined in 2009 by 1.5%, and may decline by more for 2020

• If the AWI declines for 2020 then ALL beneficiaries becoming newly 

eligible in 2022 (retirees, disabled, survivors) would have benefits 

permanently lower than those who became eligible a year earlier (notch)

• But for those becoming eligible after 2022 who had earnings in 2020, the 

indexed value of their 2020 earnings will be increased (boost)

• The net effect on actuarial status would be small—and likelihood of a 

substantial decrease now seems small

• Two bills have been introduced to address this possibility for the 2020 

AWI, and for the possibility of declines in the future; see testimony at 

https://www.ssa.gov/oact/testimony/HouseWM_20200717.pdf
For More Information Go To

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

• There you will find:

– All OASDI Trustees Reports: 1941-2019

– 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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