Magazine

UpFront | Published in June 2012

Projecting the End

By Tara Cantore | July 2012

Social Security to run out by 2033

Illustration by Gary Taxali

The annual trustees report on the financial health of Social Security Trust Funds says funds will be exhausted by 2033, three years sooner than projected last year.

According to the report, the Disability Insurance (DI) Trust Fund will be depleted in 2016, two years earlier than last year’s estimate. The report also projected that the Old-Age, Survivors, and Disability Insurance (OASDI) program costs will exceed noninterest income this year and will remain higher throughout the remainder of the 75-year period.

The report also announced:

  • The projected point at which the combined trust funds will be exhausted is 2033—three years sooner than projected last year. At this time, noninterest income will cover only about 75% of scheduled benefits;
  • The projected actuarial deficit over the 75-year long-range period is 2.67% of taxable payroll—0.44 percentage points larger than in last year’s report;
  • Over the 75-year period, the trust funds would require additional revenue, equivalent to $8.6 trillion in present-value dollars, to pay all scheduled benefits;
  • Income, including interest to the combined OASDI trust funds, amounted to $805 billion in 2011: $564 billion in net contributions, $24 billion from taxation of benefits, $114 billion in interest and $103 billion in reimbursements from the General Fund of the Treasury—almost exclusively resulting from the 2011 payroll tax legislation;
  • Total expenditures from the combined OASDI trust funds amounted to $736 billion in 2011;
  • Noninterest income fell below program­ costs in 2010 for the first time since 1983. Program costs are projected to exceed noninterest income throughout the remainder of the 75-year period;
  • The assets of the combined OASDI trust funds increased by $69 billion in 2011 to a total of $2.7 trillion;
  • During 2011, an estimated 158 million people had earnings covered by Social Security and paid payroll taxes;
  • Social Security paid $725 billion in benefits in calendar year 2011. There were about 55 million beneficiaries at the end of the calendar year;
  • The cost of $6.4 billion to administer the program in 2011 was just 0.9% of total expenditures; and
  • The combined trust fund assets earned interest at an effective annual rate of 4.4% in 2011.

“This year’s trustees’ report contains troubling, but not unexpected, projections about Social Security’s finances,” said Michael J. Astrue, Social Security commissioner. “It once again emphasizes that Congress needs to act to ensure the long-term solvency of this important program, and needs to act within four years to avoid automatic cuts to people receiving disability benefits.”