Social Security: 2 Programs, 3 Projections, 3 Actuarial Periods

Table IV.B4 Extract

(Update: the numbers in the above Table represent the present payroll gap. That is an immediate increase in FICA equalling any negative number would fund its respective program over that given period under that set of assumptions). (Update 2…a quirk in the comment section preventing viewing the chart on landing page is fixed…Dan)

The standard way to Report the long-term challenges facing Social Security is by the Long Term Actuarial Gap for combined OASDI under the Intermediate Cost Alternative, which is to say over 75 years and combining the Old Age/Survivors and the Disabled programs together under the Social Security Actuary’s Office’s best median guess as to future demographic and economic numbers. Others say that is not even long enough and say that we should actually examine those numbers over the Infinite Future Horizon. And so one or another of those numbers generally get reported in one of three forms: % of GDP, PV of Unfunded Liability, or % Actuarial Gap.

For others, including me, neither of those make sense for current workers, at least not as the end all and be all. Instead it makes more sense to treat these numbers over your expected work life or perhaps your expected time in retirement, which unless you are a very young worker indeed will be less than 75 years. And certainly not realistically measured over the Infinite Future. Plus you might have some doubts about the Intermediate Cost projection, considering it either too optimistic or too pessimistic on one front or another, or perhaps you have heard that the Disability Insurance program is facing a much more immiment crisis than the Old Age Survivors program.

Luckily the Office of the Chief Actuary has your mind in mind and in Table IV.B4 breaks all of this out into 27 possible combinations of the 2 programs plus a combined number, 3 economic and demographic models, and over 25, 50 and 75 year time periods. I took those numbers are rearranged them into a convenient grid as seen above. The point of departure for discussion probably should be the standard number alluded to in the first para: the 75 year actuarial gap for combined OASDI under Intermediate Cost Assumptions. Which can be seen as the middle number in the last row at 2.72%. This is actually a little higher than the number usually cited which for this Report was 2.66%, that is because this particular table has a more stringent definition for balance in that it requires a Trust Fund Ratio of 100 in the last year. But that doesn’t change the discussion a great deal.

Which discussion I will leave to you all for the time being. Noting only that postive numbers indicate positive actuarial balances for the program in question over that period under that assumption and so represent a program that is “fixed” for the period in question.