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Highlights from the 2011 Social Security Trustees Report

Understand the short-term and long-term solvency challenges facing Social Security, including trust fund ratios, sensitivity analysis, and actuarial balance projections. Learn about recommended reforms to restore financial soundness and considerations for policymakers. Explore options such as raising retirement age, adjusting taxable amounts, modifying PIA formula, and COLA changes. Discover the implications for individual equity, social adequacy, pay-as-you-go funding, and pre-funding. Plan ahead for potential changes to ensure the program's sustainability.

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Highlights from the 2011 Social Security Trustees Report

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  1. Highlights from the2011 Social Security Trustees Report Bruce D. Schobel, FSA, MAAA, FCA

  2. Short-Range Solvency:Trust Fund Ratios

  3. Long-Range Solvency:Trust Fund Ratios

  4. Long-Range Solvency:Trust Fund Ratio Sensitivity

  5. Long-Range Solvency:Projected Annual Balance, % of Payroll

  6. Long-Range Solvency:Projected Annual Balance Sensitivity

  7. 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

  8. Long-Range Solvency:Actuarial Balance, 2010-11

  9. Long-Range Solvency:Actuarial Balance Sensitivity

  10. Congress Should Restore Social Security’s Financial SoundnessSooner 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

  11. Policymakers must consider: Individual equity versus social adequacy? Pay-as-you-go funding versus pre-funding?

  12. Reform Options These 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)

  13. Social Security’s Normal Retirement Age

  14. Questions?

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