Published: May, 2001
Near term status: trust funds run an annual surplus.
- In calendar year 2003, the Social Security trust funds (Old-Age and Survivors Insurance and Disability Insurance, or OASDI) received income of $631.9 billion and paid out $479 billion (almost all for benefits; less than 1 percent is for administration), leaving a surplus of $152.8 billion.
- Surpluses build as trust fund reserves, and are invested in interest-bearing U.S. Treasury bonds. At the end of 2003, the reserves stood at $1.5 trillion.
Long-term status: deficits occur. Not enough income from currently scheduled tax rates to cover benefits in current law for the next 75 years.
- In 2016, current tax revenues flowing into the trust funds (payroll tax revenues and revenues from income taxation of benefits) will be less than benefit obligations due that year. Interest on the reserves and the assets themselves supplement other revenues until 2042.
- In 2042, the reserves are projected to be depleted. Revenue coming into the funds at the time is expected to cover about 73 percent of the cost of benefits due at the time.
- By 2075, the end of the 75-year projection period used by the Social Security trustees, and assuming no changes in taxes, benefits or actual experience (i.e. in fertility, mortality, and economic growth), revenues are projected to cover about 67 percent of benefit costs.
Social Security has a long-run deficit equal to 1.89% of payroll, down from the 1.92% figure last year, according to the 2004 trustees report. The deficit could be closed immediately if tax rates were raised from the current level of 12.4% (6.2% each for employees and employers) to 14.29%. The maximum tax, now $5,449.80 a year, each paid by the worker and employer, would be increased to $6,280.46. This would be an increase of $830.66 each for the worker and employer. An laternate way to close the deficit would be a reduction of 13% in all current and future benefits. The average retiree gets $895 a month. A 13% reduction would be a cut of $116.35, reducing the average monthly check to $778.65.
Causes of imbalance:
- Short-run: baby boom bulge
- Overall: longer life expectancies
Source: 2004 Report of the OASDI Board of Trustees and Social Security Office of the Chief Actuary. http://www.ssa.gov/OACT/TR/TR04/