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October 14, 2022
Social Security: Scheduled Versus Payable Benefits
Background
their intermediate assumptions). This indicates that reserves
Social Security is a self-financing program that, in 2022,
will need to be redeemed in future years.
covers approximately 182 million workers and provides
monthly cash benefits to over 65 million beneficiaries.
Without the redemption of asset reserves, Social Security
Social Security is composed of the Old-Age and Survivors
could have paid out in benefits based only on what it
Insurance (OASI) and Disability Insurance (DI) programs,
received in income. In 2021, the program had total costs of
referred to on a combined basis as OASDI.
$1,145 billion and total revenues of $1,088 billion. Thus,
approximately $56 billion in asset reserves were redeemed,
The ability to pay fully scheduled benefits on time is
or about 5% of total costs. Said differently, revenues in
determined by the financial status of Social Security.
2021 were sufficient to pay about 95% of scheduled
Without changes to current law, under the Social Security
benefits. At the beginning of 2022, the value of the
Trustees’ (hereafter trustees) intermediate assumptions—
combined trust funds was $2,852 billion. This is the value
their best estimate of future experience is that beneficiaries
of asset reserves available for Social Security to augment
in 2035 would receive a de facto reduction of about 20%.
incoming tax revenues should deficits persist as projected.
Recent surveys show about 42% of workers not yet retired
expect benefits at a reduced level. Another 42% of workers
Scheduled Versus Payable Benefits
not yet retired do not expect to receive any Social Security
The relationship described above is illustrated in Figure 1.
benefits (see “Additional Resources”). Congressional
The period through 2009 shows non-interest income (i.e.,
interest in this issue may be high because of the large
tax revenues) exceeding costs. During this period, excess
number of beneficiaries—current and future—who may
revenues accumulated in the trust funds. The period from
face benefit cuts under current law. Additionally, the
2010 onward shows cost exceeding non-interest income.
possibility of benefits cuts may affect the employment and
Full scheduled benefits—benefit amounts specified under
savings behavior of future beneficiaries.
current law—were possible because of interest income
through 2020 and because of redeemed asset reserves
Social Security Benefits and Financial
starting in 2021. Figure 1 shows how the imbalance
Status
between cost and income is projected to continue and helps
Social Security, or OASDI, is a work-based social
to answer the question of how long the trust funds can
insurance program. It protects insured workers and their
support scheduled benefits to be paid.
family members against a loss of earnings due to old age,
disability, or death. Workers obtain insured status by
Under the intermediate assumptions, the trustees project
working for a number of years specified in statute in jobs
that asset reserves will be depleted sometime in 2035. This
covered by Social Security. Social Security benefits are
means asset reserves can be redeemed from 2021 through
based on a worker’s career-average earnings in jobs
2035 to pay scheduled benefits. Once asset reserves are
covered by Social Security. About 94% of workers in paid
depleted, the program can pay out in benefits only the
employment and self-employment are covered under Social
amount it receives in income from tax revenues. Thus, there
Security.
will be a difference between scheduled benefits and payable
benefits (i.e., the percent of scheduled benefits supported by
Social Security is primarily financed through dedicated tax
revenue), as seen in Figure 1.
revenues: a payroll tax (accounting for 90.1% of program
income in 2021) and federal income taxes paid by about
Figure 1. OASDI Income, Cost, and Expenditures
half of beneficiaries on a portion of their benefits
2000-2096 as Percentages of Taxable Payroll
(accounting for 3.5% of program income in 2021). Asset
reserves are held in the OASI and DI trust funds. From
years where total revenues exceeded total cost, these earn
interest (accounting for 6.4% of program income in 2021).
In 2021, 99.0% of total expenditures went toward monthly
benefit payments.
In 2021, Social Security operated an annual deficit—the
first since 1982. Since total cost exceeded total income in
2021, some trust fund assets were redeemed to pay fully
scheduled benefits as specified under current law. The
trustees project annual deficits to persist indefinitely (under
Source: Congressional Research Service (CRS).
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Social Security: Scheduled Versus Payable Benefits
Notes: Projections use the trustees’ 2022 intermediate assumptions.
at about 100% of average wages) at full retirement age.
From 2022 to 2034, the initial benefit amount for a
The trustees project that in 2035—the projected date of
hypothetical medium worker is projected to increase about
trust fund depletion—tax revenues will be sufficient to pay
19% in real terms (from $24,465 to $30,215, or about 1.5%
about 80% of scheduled benefits. The percentage of
per year). Real scheduled benefits are projected to continue
benefits supported by revenues from payroll tax and the
to grow by about 1.1% per year throughout the 75-year
taxation of Social Security benefits will gradually decrease
projection period.
to about 74%, by 2096. As shown in Figure 1, the cost—as
a percentage of taxable payroll—is projected to increase
However, without change to current law, real payable
faster than income over the next 75-year projection period,
benefit levels are projected to drop by 20% after the trust
whereas the income rate is relatively stable. This increasing
funds become insolvent in 2035 then once again rise
cost rate is largely attributable to demographic trends (i.e., a
gradually. Projections show that initial payable benefits in
decline in the ratio of covered workers per beneficiary).
2059 would be similar to initial payable benefits in 2034.
Although other (i.e., economic) factors play a role,
Thus, the hypothetical medium earner collecting benefits in
demographic factors alone would cause the cost rate to
2059 would have the purchasing power as a similar
increase markedly in coming years.
individual initially collecting benefits in 2034.
How Will Beneficiaries Be Affected?
Figure 3. Initial Annual Benefits for Hypothetical
Figure 2 demonstrates that until the asset reserves held in
Medium Earners at Full Retirement Age, 2022-2096
the trust funds are depleted, scheduled benefits will equal
In 2022 Dollars
payable benefits. However, at the time of depletion (2035)
and absent any change to current law, total payable benefits
will become equal to continuing tax revenues. The trustees
project about 80% of scheduled benefits will be payable.
Beneficiaries could expect a 20% reduction in 2035 with
additional reductions thereafter (see Figure 2).
Figure 2. Benefits as a Percent of Scheduled Benefits
2020-2096
Source: Congressional Research Service (CRS).
Notes: Projections use the trustees’ 2022 intermediate assumptions.
What Can Be Done?
To illustrate the magnitude of changes needed to maintain
Social Security solvency over the next 75 years, the trustees
point out certain hypothetical options: (1) an immediate
3.24 percentage point increase in the combined payroll tax
rate (from 12.40% to 15.64%), (2) an immediate 20.3%
Source: Congressional Research Service (CRS).
reduction in scheduled benefits for all current and future
Notes: Projections use the trustees’ 2022 intermediate assumptions.
beneficiaries (or a 24.1% reduction for newly eligible
beneficiaries only), or (3) some combination of the two
As Figure 2 shows, the percent of benefits payable will
approaches. The trustees state, “Implementing changes
decrease to about 74% by 2096. That is, benefits would still
sooner rather than later would allow more generations to
be paid but at a reduced amount. It is unclear how payable
share in the needed revenue increases or reductions in
benefits would be handled: The Social Security Act does
scheduled benefits.”
not stipulate what would happen if scheduled benefits could
not be paid. Two possible scenarios are (1) full benefit
Additional Resources
payments equal to those scheduled under current law are
Laura D. Quinby and Gal Wettstein, How Does Media
paid on a delayed schedule or (2) reduced benefits are paid
Coverage of Social Security Affect Worker Behavior?,
on time based on Social Security income.
Center for Retirement Research at Boston College, October
2021.
Because average real earnings (i.e., nominal earnings less
inflation) generally grow over time, so do scheduled real
Pew Research Center, Looking to the Future, Public Sees
benefits, as benefit amounts are largely dependent on a
an America in Decline on Many Fronts, March 2019.
worker’s earnings. Initial real benefit amount is one
measure of benefit adequacy, as it helps to illustrate how
CRS Report RL33514, Social Security: What Would
the purchasing power of benefits can change over time.
Happen If the Trust Funds Ran Out?
Figure 3 shows initial annual benefits for hypothetical
Barry F. Huston, Analyst Social Policy
medium earners (i.e., workers with career-average earnings
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Social Security: Scheduled Versus Payable Benefits
IF12231
Disclaimer
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https://crsreports.congress.gov | IF12231 · VERSION 1 · NEW