highlights from the 2011 social security trustees report bruce d. schobel, fsa, maaa, fca
TRANSCRIPT
Highlights from the
2011 Social Security Trustees Report
Bruce D. Schobel, FSA, MAAA, FCA
Short-Range Solvency:Trust Fund Ratios
0
50
100
150
200
250
300
350
400
450
OASI 2010
DI 2010
OASI 2011
DI 2011
Long-Range Solvency:Trust Fund Ratios
0%
50%
100%
150%
200%
250%
300%
350%
400%
450%
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2025
2030
2035
2036
2037
2010
2011
Long-Range Solvency:Trust Fund Ratio Sensitivity
Long-Range Solvency:Projected Annual Balance, % of Payroll
-5%-4%-4%-3%-3%-2%-2%-1%-1%0%1%
2010
2012
2014
2016
2018
2020
2030
2040
2050
2060
2070
2080
2010 Annual Balance
2011 Annual Balance
Long-Range Solvency:Projected Annual Balance Sensitivity
-14%-12%-10%
-8%-6%-4%-2%0%2%
2011
2013
2015
2017
2019
2025
2035
2045
2055
2065
2075
2085
2011 Projected Annual Balance
High
Intermediate
Low
Long-Range Solvency:Actuarial Balance
•Actuarial Balance = Summarized Income Rate - Summarized Cost Rate
• Trust Fund Balance is included in Income Rate
• Ending Target Fund included in Cost Rate
• Expressed as a percentage of the summarized taxable payroll
2011 Values Income rate Cost Rate Actuarial Balance
25 – Year 15.01% 15.61% -0.60%
50 – Year 14.25% 16.04% -1.78%
75 - Year 14.02% 16.25% -2.22%
Long-Range Solvency:Actuarial Balance, 2010-11
Actuarial Balance 2010 2011
25 – Year -0.25% -0.60%
50 – Year -1.45% -1.78%
75 - Year -1.92% -2.22%
Long-Range Solvency:Actuarial Balance Sensitivity
2011 Actuarial Balance Low Intermediate High
25 – Year 0.78% -0.60% -2.26%
50 – Year 0.23% -1.78% -4.37%
75 - Year 0.29% -2.22% -5.59%
Congress Should Restore Social Security’s Financial Soundness
Sooner Rather Than Later• Workers will have time to plan for reduced after-tax income
and benefits.• Reforms can be phased-in more gradually over a longer
period of time, affecting more people.– Starting in 2011, achieving actuarial balance over 75 years would
require:• Increase tax rate from 12.4% to 14.55%, or• 13.8% decrease in benefits
– Starting in 2036, it would require• Increase tax rate from 12.4% to 16.45%, or• 23% decrease in benefits
Policymakers must consider:
Individual equity versus social adequacy?Pay-as-you-go funding versus pre-funding?
Reform OptionsThese are some of the “big-ticket” items that would contribute significantly to restoring the program’s solvency:– Raising the normal retirement age beyond 67– Raising the maximum taxable amount beyond
$106,800– Reducing the primary insurance account (PIA)
formula in various ways– Modifying cost-of-living adjustments (COLAs)
Social Security’s Normal Retirement Age
Worker’s Year
of BirthSocial Security’s
Normal Retirement Age
1943-54 66 years
1955 66 years and 2 months
1956 66 years and 4 months
1957 66 years and 6 months
1958 66 years and 8 months
1959 66 years and 10 months
1960 & later 67 years
Questions?