The Social Security Trustees Report in Charts
PGPF staff
June 06, 2013
Font:
 
PrintPrintEmailEmailPDFPDF

 

Social Security is on an unsustainable financial path, and legislative changes to the program “are necessary to avoid disruptive consequences for beneficiaries and taxpayers,” according to the latest report from the Trustees. Their report highlights several financial challenges the program faces over the coming decades:

  • Since 2010, Social Security has been spending more each year than it collects in taxes. In 2012, the program added $160 billion to the federal deficit. This cash-flow deficit is projected to continue through the decade, and then accelerate in the following decades.
  • Within three years, the program will not be able to pay full disability benefits as scheduled under current law. If legislative action is not taken, disability benefits would have to be cut by 20 percent after 2016.
  • Within twenty years, the Social Security trust fund will be exhausted. After that point in 2033, Social Security benefits would have to be cut by 23 percent unless policymakers take action.

As the following charts show, these budgetary challenges stem from the aging of the population. The retirement of the large baby boom generation will sharply push up the number of people claiming benefits each year.

Baby-boomer retirements will significantly increase the number of Social Security beneficiaries

SOURCE: Data from the Social Security Administration, The 2013 Annual Report of the Board of Trustees of the Federal Old-Age And Survivors Insurance and Federal Disability Insurance Trust Funds, May 2013. Compiled by PGPF.
NOTE: All federal OASDI beneficiaries are included. The highlighted retirement period above covers the time between when the oldest of the generation were eligible for early retirement, at age 62, and when the youngest baby boomers will turn 70.

Over the past several decades, longevity has significantly improved. The Trustees project a continuation of those improvements, which will significantly increase the number of years that people will be claiming benefits.

Projections of life expectancy have improved since 2008

SOURCE: Data from the Social Security Administration, The Annual Report of the Board of Trustees of the Federal Old-Age And Survivors Insurance and Federal Disability Insurance Trust Funds, May 2013 and April 2008. Compiled by PGPF.
NOTE: Measures are based on period life expectancy at age 65.

The Social Security program is largely financed through taxes paid by current workers. However, as the population ages, the ratio of workers-to-beneficiaries is projected to fall.

As the population ages, fewer workers will be paying taxes to support Social Security beneficiaries

SOURCE: Data from the Social Security Administration, The 2013 Annual Report of the Board of Trustees of the Federal Old-Age And Survivors Insurance and Federal Disability Insurance Trust Funds, May 2013. Compiled by PGPF.

Social Security is already in cash-flow deficit—that is, it pays more in benefits each year than it takes in through taxes. As the population continues to age, those deficits will grow sharply.

Social Security has transitioned from annual surpluses to annual deficits

SOURCE: Data from the Social Security Administration, The 2013 Annual Report of the Board of Trustees of the Federal Old-Age And Survivors Insurance and Federal Disability Insurance Trust Funds, May 2013. Compiled by PGPF.
NOTE: Data exclude interest income. The cumulative deficit before insolvency is equal to the current value of the OASDI Trust Fund.

Social Security’s long-term financial challenges will stress the federal budget as a whole. As the program’s financial condition continues to deteriorate, Social Security will increase federal budget deficits by $2.7 trillion over the next 20 years and over $12 trillion over the next 75 years unless policymakers take action.

Sustainable solutions will require bipartisan action and compromise. Policymakers will have to grapple with hard decisions on both the spending and revenue side of the program. Although some have argued that we have plenty of time to address Social Security’s challenges, the sooner reforms are enacted the less disruptive they will be. If reforms can be phased in slowly, future beneficiaries and taxpayers will be able to adjust and plan accordingly. The Trustees highlight the benefits of taking action now: “With informed discussion, creative thinking, and timely legislative action, Social Security can continue to protect future generations."

INSIDE PGPF

  • Peter G. Peterson

    Q&A with Pete Peterson
    Foundation Chairman candidly discusses fiscal and personal topics.
    Read More

  • Charts

    Charts
    Fiscal issues by the numbers.

    Read More

  • Special Report

    Special Report
    The economic cost of crisis-driven fiscal policy.

    Read More

PGPF newsletter

to Get the PGPF Newsletter.

 

Our Past Newsletters.