Wednesday, May 18, 2022

12:30 – 1:45pm EasternTime

Moderator:

Presenters:

Barbara J. Ruel –Mercer

Stephen C. Goss – Social Security Administration

Thomas S. Terry – The Terry Group 

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The views expressed here are those of the presenter(s), and not necessarily those of the Conference of ConsultingActuaries. Nothing in this presentation is intended to be an interpretation

of Actuarial Standards of Practice by the sponsoring organizations.

Copyright © 2022 Conference of Consulting Actuaries. CCA retains copyright of this presentation. Content remains property of contributors.

Current State of Social Security and Implications of COVID
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CCA Retirement Webinars • May 18, 2022

Introductions and Overview

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Current State of Social Security

Effects of COVID on the System

Agenda

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A Few Common Myths

Proposals for Strengthening the System

CCA Retirement Webinars • May 18, 2022
Current State of Social Security

CCA Retirement Webinars • May 18, 2022 Submit your questions to: conference@ccactuaries.org
Solvency: OASI+DI Trust Fund Reserve Depletion Projected 

to Occur in 2034 Depletion Projected to Occur in 2034

Reserve depletion date varied from 

2029 to 2042 in reports over the 

past 30 years (1992-2021).

DI Trust Fund: 

reserve depletion in 2057.

Change from prior Trustees Report 

largely due to reflecting the 

pandemic/recession. eport largely 

due to reflecting the 

pandemic/recession.

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

2021 TR DI

2020 TR DI

2021 TR OASI

2020 TR OASI

2021 TR OASDI

2020 TR OASDI

Historical Projected

Tax Rate

Reallocation

CCA Retirement Webinars • May 18, 2022 6
OASDI Annual Cost and Non-Interest Income as Percent of 

Taxable Payroll

Cost began exceeding tax 

revenue in 2010 in the great 

recession, but has continued.

Even if reserves deplete in 2034, 

78 percent of scheduled benefits 

will still payable.

And 74 percent would be payable 

in 2095.

CCA Retirement Webinars • May 18, 2022 7

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:

2020-33: 100%

2034: 78%

2095: 74%

Historical Projected
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

Sustainability: Cost as Percent of GDPPted to Occur in 

2034

OASDI Cost averaged 4.2 percent 

of GDP for 1990-2008. 

But has risen to over 5 percent, on 

the way to 6 percent by about 2035.

due to reflecting the 

pandemic/recession.

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Why is Cost Rising Faster than Payroll and GDP? 

Changing Age Distribution. 

Largely lower birth rates.

CCA Retirement Webinars • May 18, 2022 9

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 2021 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

CCA Retirement Webinars • May 18, 2022 10

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 only.

1865-1895 4.44 3.09

1896-1925 3.36 2.80

1926-1965 2.86 2.71

1966-1990 1.99 1.95

1991-2019 1.96 1.95

Average

TFR

Average

Adjusted TFR
Adequacy of Benefits OASDI provide?

How Much of the Desired 75 

Percent Replacement of earnings 

will OASDI provide?

CCA Retirement Webinars • May 18, 2022 11

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 ($26,579 for 2021; 24th percentile)

Medium Earner ($59,065 for 2021; 56th percentile)

High Earner ($94,503 for 2021; 81st percentile)

Max Earner ($142,800 for 2021; 100th percentile)

Historical Projected

Source: Annual Recurring Actuarial Note #9 

www.ssa.gov/oact/NOTES/ran9/index.html
But if Reserves are Depleted in 2034 . . . 

. . . even the Currently 

Scheduled Benefit Levels Will 

Not Be Payable. 

Congressional action is needed

CCA Retirement Webinars • May 18, 2022 12

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 ($26,579 for 2021; 24th percentile)

Medium Earner ($59,065 for 2021; 56th percentile)

High Earner ($94,503 for 2021; 81st percentile)

Max Earner ($142,800 for 2021; 100th percentile)

Historical Projected

Source: Annual Recurring Actuarial Note #9 

www.ssa.gov/oact/NOTES/ran9/index.html
For those who choose to start Retirement Benefit at Age 62 . . . 

. . .the earliest option, 

Benefits will be even lower, 

both Scheduled and Payable.

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0

10

20

30

40

50

60

70

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 62

Low Earner ($26,579 for 2021; 24th percentile)

Medium Earner ($59,065 for 2021; 56th percentile)

High Earner ($94,503 for 2021; 81st percentile)

Max Earner ($142,800 for 2021; 100th percentile)

Historical Projected

Source: Annual Recurring Actuarial Note #9 

www.ssa.gov/oact/NOTES/ran9/index.html
Effects of COVID on the System

CCA Retirement Webinars • May 18, 2022 Submit your questions to: conference@ccactuaries.org
15

Changes this year due to pandemic/recession 

Changes since 2021 TR assumptions were setand methods 

improvements -0.16 percent

w data and methods improvements -0.16 percent

15

Factors increasing solvency Factors decreasing solvency

• Increased deaths in 2020 through 2023

• Consistent for 2020 based on CDC. But actual 

deaths are higher than we projected for 2021

• Lower employment and earnings through 2023

• Consistent—so far. Except December 2021 

COLA is expected to be closer to 6% than 

3.1%.

• Lower applications for benefits, particularly 

disability

• Continuing low so far, but we expect them to 

rise after the pandemic.

• Delays in births and immigration

• Actual births and immigration look to be higher 

than we assumed for 2021

• Permanent loss in level of worker productivity

• Too soon to tell

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How About Employment? Great ”Resignation” or Opportunity?

Job Quits Have Soared. As Employment Has Recovered Fast

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Changes in timing of trust fund reserve depletion

17

Reserve Depletion year Vs 2020 Report

OASDI 2034 1 year earlier

OASI 2033 1 year earlier

DI 2057 8 years earlier

CCA Retirement Webinars • May 18, 2022 Submit your questions to: conference@ccactuaries.org
18

Changes in OASDI actuarial balance in 2021 report

18

Overall Change (0.32)%

Valuation Period (0.06)%

Legislation

• restore and maintain DACA 

(0.01)%

Demographic data, assumptions & methods

• New cohort fertility method and higher ultimate fertility rate (roughly offsetting cost effects)

• New dementia cause of death category

• Higher recent & projected near-term mortality due to COVID-19 

(0.01)%

Economic data, assumptions & methods 

• Updated labor force projection model and lower ultimate unemployment rate

• Slightly faster real growth in average wage levels

• Lower near-term real interest rates

• Level of productivity and GDP permanently lowered by 1% due to recession

• Reduced level of revenue from taxation of benefits

(0.09)%

Other new data and methods improvements (0.16)%

CCA Retirement Webinars • May 18, 2022
Cases, hospitalizations, and deaths reported daily to CDC: reports lag

Source: https://covid.cdc.gov/covid-data-tracker

19

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Death reporting lags date of death Estimated complete suggests Rising 

20

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Reported total deaths by age group Reported PIC deaths by age group

Earlier vaccinations for 65+ apparent by April 2021

21

CCA Retirement Webinars • May 18, 2022 21
A Few Common Myths

CCA Retirement Webinars • May 18, 2022 Submit your questions to: conference@ccactuaries.org
23

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 78% of scheduled benefits in 2034

• And 74% of scheduled benefits in 2095

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

CCA Retirement Webinars • May 18, 2022 24
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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

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

c) Disability costs have matured, and are dropping

CCA Retirement Webinars • May 18, 2022 25
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Myth 3: The money in the Trust Funds has been spent

Facts: 

a) Every dollar of income is invested by law in interest-bearing 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

CCA Retirement Webinars • May 18, 2022 26
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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 life annuity at 

terms available nowhere else

CCA Retirement Webinars • May 18, 2022 27
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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 career-average 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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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

CCA Retirement Webinars • May 18, 2022 Submit your questions to: conference@ccactuaries.org 30
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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

CCA Retirement Webinars • May 18, 2022 Submit your questions to: conference@ccactuaries.org 31
Proposals for Strengthening the System

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33

Make choices addressing OASDI shortfall 2034-2095:

•Raise scheduled revenue after 2033 by about one-third

•Reduce scheduled benefits after 2033 by about one-fourth

•Or some combination of the two

How to eliminate the Social Security long-term actuarial 

deficit

CCA Retirement Webinars 33 • May 18, 2022
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Lower benefits for retirees—not disabled

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

• Can exempt long-career low earners

Lower benefits mainly for high earners

• Reduce PIA above some level

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

Ways to lower cost

CCA Retirement Webinars 34 • May 18, 2022
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Lower benefits mainly for the oldest old

• Reduce the COLA by using a chained version of the CPI

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

62)

Increase the number of years used in calculation (currently 35)

• Especially hurts those who haven’t been in the workforce for more than 35 years

Ways to lower cost (continued)

CCA Retirement Webinars 35 • May 18, 2022
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Raise tax rate on all earners

• Increasing rate immediately from current 12.4 percent to about 15.6 percent is projected to 

eliminate the long-range shortfall

Raise tax on highest earners

• Increase taxable maximum amount ($147,000 in 2022) or remove it completely

• Some tax on all earnings above the maximum

Ways to increase revenue

CCA Retirement Webinars 36 • May 18, 2022
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Tax employer group health insurance premiums

• Affects only middle class if taxable maximum remains the same

Tax certain investment income

• Consistent with ACA approach?

• Or potentially a wealth tax?

Maintain larger trust fund reserves

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

• Added interest/yield can lower needed taxes

Ways to increase revenue (continued)

CCA Retirement Webinars 37 • May 18, 2022 Submit your questions to: conference@ccactuaries.org
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Historically, Congress has waited until reserve depletion is imminent 

• Difficult to lower benefits or raise taxes until necessary

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 2034

• One year sooner due to COVID-19

• The date has varied between 2029 and 2042 over the past 30 years

Timing for changes

CCA Retirement Webinars • May 18, 2022 Submit your questions to: conference@ccactuaries.org 38
39

Thank You!

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