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Highlights from the 2011 Social Security Trustees Report

Highlights from the 2011 Social Security Trustees Report. Bruce D. Schobel , FSA, MAAA, FCA. Short-Range Solvency: Trust Fund Ratios. Long-Range Solvency: Trust Fund Ratios. Long-Range Solvency: Trust Fund Ratio Sensitivity. Long-Range Solvency: Projected Annual Balance, % of Payroll.

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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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