File talk:OASDI Income and Cost Rates Under Intermediate Assumption.png

Source URL: http://www.socialsecurity.gov/OACT/TR/TR08/tr08.pdf

Key Timeline Elements


 * 2008-2017: Payroll tax revenues exceed payments (surplus), so Trust funds build from $2.2 trillion in 2008 to $4.3 trillion in 2017. (Page 2 of the above cited report).


 * 2017: Payments begin to exceed revenues as more Baby-boomers retire and ratio of employed to retired workers declines.


 * 2017-2041: Payments greater than payroll tax revenues (deficit). Difference is addressed by redemption of trust funds "IOU's" against all types of federal government revenues.


 * 2041: Trust funds are exhausted. By law, social security can only pay out to extent payroll tax revenues are collected.  This results in a 22% drop in payouts vs. the scheduled payments.  So the program never goes technically bankrupt, as it is funded by the dedicated payroll tax.  Payouts will simply have approximately 22% less purchasing power relative to 2041.

Note: This means the $200 billion Social Security surplus today will swing to about a $200 billion average deficit between 2017-2041, putting significant pressure on the budget as trust fund IOU's are redeemed.

Explanation from the Social Security / OASDI Trustees 2008 Report: "The year-by-year relationship between income and cost rates shown in figure II.D2 illustrates the expected pattern of cash flows for the OASDI program over the full 75-year period. Under the intermediate assumptions, the OASDI cost rate is projected to increase rapidly and first exceed the income rate in 2017, producing cash-flow deficits thereafter. Redemption of trust fund assets will allow continuation of full benefit payments on a timely basis until 2041, when the trust funds are projected to become exhausted. This redemption process will require a flow of cash from the General Fund of the Treasury. Pressures on the Federal Budget will thus emerge well before 2041. Even if a trust fund’s assets are exhausted, however, tax income will continue to flow into the fund. Present tax rates are projected to be sufficient to pay 78 percent of scheduled benefits after trust fund exhaustion in 2041 and 75 percent of scheduled benefits in 2082."