Social Security: Estimated Impact of Hypothetical Solvency Measures

February 21, 2024 R47924

Social Security: Estimated Impact of
February 21, 2024
Hypothetical Solvency Measures
Barry F. Huston
Social Security has long been a program of high congressional interest both because of the
Analyst Social Policy
number of people who receive benefits—now and in the future—and because of the program’s

projected long-term financial imbalance. Many proposals are typically put forth in each Congress
to address the program’s projected financial shortfall. Some pr
Sarah A. Donovan
oposals aim to achieve financial
Specialist in Labor Policy
balance by reducing costs (i.e., benefit amounts), while some proposals aim to achieve financial

balance by raising revenues (e.g., payroll taxes). Other proposals incorporate both cost-reducing
and revenue-increasing provisions.
Anthony A. Cilluffo
Analyst in Public Finance
In its 2023 annual report, the Social Security Board of Trustees projected that under current law,

Social Security’s revenues and asset reserves will be insufficient to pay full scheduled benefits
after 2034. Under the trustees’ intermediate assumptions—their best estimate for the future

experience—the magnitude of the changes needed to maintain Social Security solvency increases
as the projected insolvency date approaches. This characteristic is attributable to the program’s rising costs and suggests that
the portfolio of legislative options to achieve solvency decreases as the trust funds approach the projected depletion date. The
trustees state, “Implementing changes sooner rather than later would allow more generations to share in the needed revenue
increases or reductions in scheduled benefits.”
To help illustrate the magnitude of the projected financial shortfall, the trustees provided estimates for four hypothetical
scenarios—each using 2023 as a starting point—that would maintain the trust funds’ solvency (i.e., the capacity to pay full
benefits scheduled under current law on a timely basis):
1. Immediate tax increase: The trustees estimate that fulfilling all scheduled benefits payments throughout the 75-
year projection period would require an “immediate” (i.e., starting in 2023) payroll tax rate increase of 3.44
percentage points. That is, the combined Social Security payroll tax rate would increase from 12.4% of covered
earnings to 15.84% of covered earnings (an increase of about 28%). This would require Congress to enact legislation
to change current law.
2. Immediate benefit reduction: If scheduled revenues were to remain as they are under current law, the trustees
estimate that maintaining trust fund solvency would require an immediate (i.e., starting in 2023) benefit reduction of
21.3% applied to all current and future beneficiaries. This would require Congress to enact legislation to change
current law.
3. Delayed tax increase: If a change in the payroll tax were to be delayed, and implemented at the time of projected
trust fund depletion (i.e., effective in 2034), it would require an increase of 4.15 percentage points—an increase in
the combined payroll tax rate to 16.55% of covered earnings (an increase of about 33%). This would require
Congress to enact legislation to change current law.
4. Delayed benefit reduction: If a benefit reduction were to be implemented at the time of projected trust fund
depletion (2034), benefits would need to be reduced by 25% to maintain trust fund solvency. This, however, would
not require Congress to enact legislation to change current law.
The trustees also note that some combination of approaches could be adopted. For instance, lawmakers could propose a
relatively smaller tax increase with a relatively smaller benefit reduction to achieve the same result as one of the four
hypothetical scenarios listed above. The potential effects of such policy combinations are not contemplated in this report.
This report examines the potential effects of these four hypothetical changes to Social Security benefits and the payroll tax
rate for a set of hypothetical earners of varying earnings levels and birth cohorts. Specifically, the report presents the changes
for very low, low, medium, high, and maximum lifetime hypothetical earners—as developed by the Social Security
Administration—in four birth cohorts (1960, 1980, 2000, and 2020). This analysis finds that an immediate payroll tax rate
increase would have a relatively smaller impact on current beneficiaries or those close to claiming benefits, as they are less
likely to be subject to the higher payroll taxes. Moreover, a delayed payroll tax rate increase would effectively shift a higher
additional payroll tax burden onto younger cohorts. Similarly, hypothetical benefit reductions would affect workers of
different birth cohorts in an unequal manner. An immediate (2023) benefit reduction would affect all current and future
beneficiaries. However, under a delayed benefit reduction (e.g., 2034), many current beneficiaries would be unaffected.
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Social Security: Estimated Impact of Hypothetical Solvency Measures

Because some demographic groups are more concentrated in lower earner categories and others in higher earner categories,
this analysis also suggests that the effects of certain policy changes may not be experienced uniformly by workers with
different genders, races, or ethnicities.
This report does not examine alternative methods of addressing the financial shortfall such as raising or eliminating the cap
on earnings subject to the payroll tax, raising the retirement age, or expanded sources of funding such as from non-wage
earnings.
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Social Security: Estimated Impact of Hypothetical Solvency Measures

Introduction
Social Security protects insured workers and their family members against the loss of income due
to old age, disability, or death. The program is composed of Old-Age and Survivors Insurance
(OASI) and Disability Insurance (DI) and is commonly referred to on a combined basis as
OASDI. Most Social Security beneficiaries are retired workers. In October 2023, the 49.9 million
retired workers who collected OASI benefits accounted for 74.6% of all Social Security
beneficiaries.1 Retired workers’ benefits are based on their past earnings, the age when they claim
benefits, and other factors.2
Social Security benefits are an important part of retired beneficiaries’ financial security.3 As such,
any change in the level of monthly benefits—and the program’s financial ability to continue
payment of benefits—is of ongoing interest to lawmakers. Under current law, Social Security’s
revenues and asset reserves are projected to be insufficient to pay full scheduled benefits after
2034.4 Under their intermediate assumptions, the Social Security Board of Trustees estimates that
the magnitude of policy changes required to maintain Social Security solvency increases as 2034
draws near.5 That is, a policy change to maintain solvency (e.g., a payroll tax increase or a benefit
reduction) that would take effect in 2025 would be smaller in magnitude than a similar policy
change that would take effect in 2030.
To demonstrate the extent of the projected financial shortfall, the trustees estimate changes in the
payroll tax rate and benefits that would be required to keep the trust funds solvent. The scenarios
were presented in the 2023 annual report to illustrate the magnitude of the projected financial
shortfall. The report offers four hypothetical scenarios that would maintain the trust funds’
solvency (i.e., the capacity to pay full benefits scheduled under current law on a timely basis): (1)
an immediate payroll tax rate increase, (2) an immediate benefit reduction for all beneficiaries,
(3) a delayed payroll tax rate increase, and (4) a delayed benefit reduction for all beneficiaries.

1 Another 11.1% were disabled workers. The remaining beneficiaries were spouses or children of retired or disabled
workers and survivors. Social Security Administration (SSA), “Monthly Statistical Snapshot, October 2023,” Table 2.
See the latest edition of the Monthly Statistical Snapshot at https://www.ssa.gov/policy/docs/quickfacts/stat_snapshot/.
2 Benefits that are paid to workers’ dependents and survivors are also based on the earnings of the insured workers.
3 Research suggests that Social Security benefits accounted for most of the decline in poverty among the 65 and older
from 1967 through 2000. For more information, see CRS Report R45791, Poverty Among the Population Aged 65 and
Older; and CRS Report R47341, Income for the Population Aged 65 and Older: Evidence from the Health Retirement
Study (HRS).
4 Under current law, Social Security’s revenues are projected to be insufficient to pay full scheduled benefits after 2034
under intermediate assumptions. SSA, Office of the Chief Actuary (OCACT), The 2023 Annual Report of the Board of
Trustees of the Federal Old-Age and Survivors Insurance and Federal Disability Insurance Trust Funds, March 31,
2023, https://www.ssa.gov/OACT/TR/2023/tr2023.pdf (hereinafter cited as 2023 Annual Report). Under current law,
the OASI and DI trust funds are distinct entities and cannot borrow from each other when faced with a funding
shortfall. In the past, Congress has authorized temporary interfund borrowing. As such, analysts often treat the two trust
funds collectively on a hypothetical basis as the combined OASDI trust funds. For more information, see CRS Report
RL33514, Social Security: What Would Happen If the Trust Funds Ran Out? The trustees’ 2023 intermediate
assumptions reflect their best understanding of the status of the Social Security trust funds at the start of 2023.
5 In each annual report, the trustees present three alternative sets of assumptions for demographic, economic, and
program-specific factors. The low-cost set of assumptions represents a future experience that is the most advantageous
to the program’s financial status. The high-cost set of assumptions represents a future experience that is the least
advantageous to the program’s financial status. As the trustees state: “These alternatives are not intended to suggest that
all parameters would be likely to differ from the intermediate values in the specified directions, but are intended to
illustrate the effect of clearly defined scenarios that are, on balance, very favorable or unfavorable for the program’s
financial status.” In actual experience, it is unlikely that all demographic, economic, and program-specific factors move
in a manner that is either favorable or unfavorable to the program’s financial status. Thus, the trustees use the
intermediate set of assumptions to illustrate their best guess as to the future experience (2023 Annual Report, p. 20).
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Social Security: Estimated Impact of Hypothetical Solvency Measures

The trustees also note that a combination of approaches could be adopted.6 For instance, a
relatively smaller immediate tax increase could be paired with a relatively smaller immediate
benefit reduction to achieve the same projected solvency as one of the four hypothetical scenarios
the trustees use to illustrate the magnitude of the shortfall. The potential impacts of these policy
combinations are not explored in this report. Alternative methods of addressing the financial
shortfall—such as raising or eliminating the cap on earnings subject to the payroll tax, raising the
retirement age, or expanded sources of funding such as from non-wage income—are also not
explored in this report.
Generally speaking, Social Security’s program costs are rising, which suggests that in order to
maintain the trust funds’ solvency, a delayed payroll tax rate increase would need to be higher
than an immediate payroll tax rate increase. Similarly, a delayed benefit reduction would need to
be larger if implemented at the projected date of trust fund exhaustion than if implemented
immediately.
This report examines the potential effects of the four hypothetical policy scenarios identified by
the Board of Trustees for a set of hypothetical earners of varying earnings levels and birth
cohorts.7 Specifically, the report presents the changes for very low, low, medium, high, and
maximum lifetime hypothetical earners—as developed by the Social Security Administration
(SSA)—in four birth cohorts: 1960, 1980, 2000, and 2020.8 The report first provides a brief
explanation of how benefits and taxes are computed under current law. It then presents the
estimated effects of the four hypothetical policy scenarios created by the Board of Trustees on
effective benefit rates, effective tax rates, and benefit-to-tax ratios of different earners in the
selected birth cohorts. The figures and tables included in this section highlight that delayed action
scenarios (i.e., measures implemented at the projected trust fund depletion dates) concentrate the
effects on younger cohorts. Finally, analysis presented in the appendix to the report considers the
demographic and other characteristics of workers in various earnings categories based on the SSA
hypothetical earner definitions and cross-sectional data from a large national household survey.
Because some demographic groups are more concentrated in lower earner categories and others
in higher earner categories, this analysis suggests that the effects of certain policy changes may
not be experienced uniformly by workers of different genders, races, or ethnicities.
Social Security Benefits and Payroll Taxes Under
Current Law
The Social Security benefit formula uses both worker-specific information, such as past earnings
history and the age at which benefits are claimed, and birth-cohort-specific parameters (average
economy-wide wages in the year a worker turns 60) to derive an individual’s monthly benefit
amount. This section provides a high-level description of the benefit formula.9 It briefly describes

6 2023 Annual Report, pp. 5-6.
7 2023 Annual Report, pp. 5-6.
8 These cohorts were selected to highlight how the effective date of policy options would affect workers of different
ages. The 1960 birth cohort will reach full retirement age (FRA)—the age at which Social Security benefits can be
collected without an adjustment for early retirement—in 2027. That is, the 1960 birth cohort is close to exiting the
labor force and entering retirement. The 1980 birth cohort will reach FRA in 2047. Thus, they could be considered to
have worked about half of their expected time in the labor force. The 2000 birth cohort, at age 23 in 2023, is relatively
new to the labor force and not relatively close to benefit collection (i.e., retirement). And the 2020 birth cohort, at age
three in 2023, is still many years from entering the labor force and further still from benefit collection.
9 For a more detailed description of the current-law benefit formula, see CRS Report R46658, Social Security: Benefit
Calculation.
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benefit eligibility (i.e., “insured status”) conditions, the key components of the Social Security
benefit formula, and the Social Security payroll tax. The effects of changes to the benefit formula
components and payroll tax are illustrated in subsequent sections of the report.
Hypothetical Earners
This report presents the effects of potential changes in the benefits and payroll tax rate on a set of
five hypothetical earners—as defined by SSA—whose career earnings range from very low
earnings to maximum earnings and vary across birth cohorts. Hypothetical earners are used to
illustrate how the benefit formula works and how changes to the benefit formula could affect
workers of different earnings levels and different ages.
In brief, the career earnings profiles for hypothetical earners are calculated using an age-specific,
scaled factor developed by SSA’s Office of the Chief Actuary (OCACT). The scaled factor
conveys, for each age, an individual’s average earnings as a share of the average wage index in
the year that the individual was that age.10 Earnings profiles are then calculated by birth cohort.
For persons in a given cohort, estimated earnings for a given year and age are calculated as the
product of the respective scaled factor and the average wage index (AWI) for that year.11 These
estimated earnings are then indexed to the AWI for the year in which the cohort turns 64.12
Finally, estimated earnings are used to create four hypothetical worker profiles, such that career-
average estimated earnings are 25% (very low hypothetical earners), 45% (low hypothetical
earners), 100% (medium hypothetical earners), and 160% (high hypothetical earners) of the AWI
in the year prior to entitlement.13 A fifth category of hypothetical earner (maximum hypothetical
earner) is assumed to earn at least the taxable maximum (i.e., contribution and benefit base) in
each year from age 21 to 64.14 Based on these SSA methods, hypothetical workers are assumed to
have long and consistent earnings histories at their respective levels.15

10 OCACT applies additional adjustments to the scaled factor for ages 62 and older. OCACT, Scaled Factors for
Hypothetical Earnings Examples Under the 2023 Trustees Report Assumptions, March 2023, Table 1,
https://www.ssa.gov/OACT/NOTES/ran3/an2023-3.pdf. Scaled factors are assumed to remain consistent for all birth
cohorts.
11 For more information on the AWI, see CRS In Focus IF11931, Social Security: The Average Wage Index.
12 Methods used in the source cited in footnote 10 to calculate indexed career-average earnings differ from those used
to calculate the average indexed monthly earnings. The method used in the actuarial note indexes earnings prior to the
year of entitlement rather than two years prior to eligibility as would be done under the current-law benefit formula.
13 The model does not assume that hypothetical workers earn a constant share of AWI in each year but that over their
careers their average earnings are a particular share of AWI in the year prior to entitlement. For example, high earners
are assumed to earn 45.4% of AWI in the year they are age 21. This rate increases over time until it peaks at 175.2% of
AWI in the year they are age 48, after which it declines to 133.2% in the year they are age 62.
14 Scaled earnings factors are published for hypothetical workers through age 64. For this report’s analysis, hypothetical
workers are assumed to earn at the same level of AWI at ages 65 and 66 as they did at age 64. While this assumption
does not affect benefit computation (i.e., primary insurance amounts are calculated at age 62), it does impact earnings
and total payroll taxes for hypothetical workers for ages 65 and 66. For more information, see CRS Report RL32896,
Social Security: Raising or Eliminating the Taxable Earnings Base.
15 This assumption does not always reflect reality. One study shows that in a sample of workers born between 1926 and
1960, the average worker had 5.7 years of zero earnings within their highest 35 years of earnings. The distribution of
zero earnings in this sample was highly skewed (i.e., 60% of workers had no years of zero earnings while 7% had more
than 25 years of zero earnings). Women were estimated have more years of no earnings as compared to men, and years
of no earnings were negatively correlated to earnings level (i.e., workers with lower earnings were estimated to
experience a larger number of years of no earnings than workers with higher earnings). See Chad Newcomb,
Distribution of Zero-Earning Years by Gender, Birth Cohort, and Level of Lifetime Earnings, SSA,
https://www.ssa.gov/policy/docs/rsnotes/rsn2000-02.html#mt2.
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Hypothetical Wages
Figure 1 shows the result of this process for the 1960 birth cohort with hypothetical low earners
consistently earning relatively low wages throughout their careers, whereas hypothetical high
earners consistently earn relatively high wages throughout their careers. For example, a
hypothetical high earner born in 1960 would have turned 47 in 2007 and earned at about 175% of
the AWI for that year, or $70,710.16 Alternatively, the hypothetical low earner born in 1960 would
have turned 54 in 2014 and earned at about 48.2% of the AWI, or $22,404. Figure 1 also displays
the earnings level for a hypothetical maximum worker, which is simply the taxable maximum for
that year (i.e., the annual limit on earnings subject to the Social Security payroll tax).
Figure 1. Hypothetical Earnings for the 1960 Birth Cohort by Worker Earnings Level,
1981-2026

Source: CRS using Office of the Chief Actuary (OCACT), Scaled Factors for Hypothetical Earnings Examples Under
the 2023 Trustees Report Assumptions, March 2023, Table 1, https://www.ssa.gov/OACT/NOTES/ran3/an2023-
3.pdf.
Notes: Hypothetical workers earn a fixed percentage of the average wage index (AWI) in each year.

16 For instance, the 1960 birth cohort was 47 in 2007. A hypothetical high earner at age 47 earns at 175.0% of AWI.
The AWI in 2007 was $40,405.58, and 175.0% of $40,405.58 is $70,709.77.
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Social Security Payroll Taxes
Social Security is funded by a tax of 6.2% of covered wages imposed on employees and
employers (12.4% combined).17 Self-employed workers pay 12.4% of their net self-employment
earnings (business earnings minus all legal deductions, such as the cost of goods sold) toward
Social Security as a portion of their self-employment taxes. The Social Security payroll tax
applies only to wages paid up to the Social Security wage base limit for the year ($160,200 in
2023, adjusted annually for the growth in average wages). The employee portion of the Social
Security tax is directly withheld from wages paid to an employee.18 The withheld employee
portion and the employer portion are deposited to the government by employers, generally
monthly or semi-weekly, often when the employer processes payroll.19
Social Security payroll tax rates have largely remained the same since 1990 (outside of the 2011-
2012 Social Security payroll tax holiday, provided as a temporary relief in the aftermath of the
Great Recession of 2007-2009), as shown in Figure 2.20 The recent period of constant rates
follows a period of regular rate increases. The first Social Security tax was a 1% levy on
employees on covered wages earned starting in 1937, with employers also paying the same
amount.21 Combined Social Security payroll tax rates rose from 2% in 1949 to 12.4% in 1990.
The last Social Security tax rate increase was part of the Social Security Amendments of 1983
(P.L. 98-21).22 Figure 2 shows the payroll tax rate and the contribution and benefit base (CBB;
i.e., taxable maximum) from 1951 to 2023.23

17 Generally, the tax base for the Social Security payroll tax is all compensation for employment, which includes wages
and the cash value of many benefits. There are several exceptions, including for employer-provided health insurance
and certain employer retirement contributions. The full list of exceptions is at Title 26, Section 3121, of the U.S. Code.
The tax applies to compensation paid to employees in “covered employment.” See above for more information about
covered employment.
18 The payroll tax burden is often believed to fall on workers as the employer’s share of payroll taxes is passed on to
employees in the form of lower wages. That is, while the statutory incidence is that half of the combined payroll tax is
paid by the employee, research suggests that at least some of the employer-paid payroll taxes are born by workers in
terms of lower wages. As discussed later, the analysis of this report assumes a worker bears the full burden of the
payroll tax rate. See “Distribution of Payroll Tax Burden” in CRS Report R47062, Payroll Taxes: An Overview of
Taxes Imposed and Past Payroll Tax Relief; and Congressional Budget Office (CBO), Revisiting the Extent to Which
Payroll Taxes Are Passed Through to Employees, https://www.cbo.gov/system/files/2021-06/57089-Payroll-Taxes.pdf.
19 Semi-weekly deposits are generally made every two weeks. See 26 C.F.R. §31.6302-1.
20 The payroll tax holiday included a transfer of funds from general revenue to the Social Security trust funds. For more
information, see “Employee Payroll Tax Holiday” in CRS Report R47062, Payroll Taxes: An Overview of Taxes
Imposed and Past Payroll Tax Relief.
21 The Federal Insurance Contributions Act (26 U.S.C. §§3101 et seq.) moved the tax provisions to the Internal
Revenue Code in 1954 and prescribed further increases. See CRS Report R42035, Social Security Primer.
22 The Social Security Amendments of 1977 (P.L. 95-216) established the 6.2% payroll tax rate for employees and
employers for 1990 and later. The 1983 amendments accelerated gradual tax increases scheduled under the 1977
amendments and increased the self-employment tax rate to twice that of the employee/employer rate. See
https://www.govinfo.gov/content/pkg/STATUTE-91/pdf/STATUTE-91-Pg1509.pdf#page=3.
23 Automatic indexation of the CBB to growth in the AWI was established as part of the 1972 Amendments to the
Social Security Act (P.L. 92-336), effective in 1975, at the same time automatic cost-of-living adjustments (COLAs)
were established. Prior to 1975, increases in the CBB were legislated on an ad hoc basis. See CRS Report RL32896,
Social Security: Raising or Eliminating the Taxable Earnings Base.
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Social Security: Estimated Impact of Hypothetical Solvency Measures

Figure 2. Social Security Covered Wages and Payroll Tax Rate, 1951-2023

Source: Figure created by CRS using data from Social Security Administration (SSA), “Social Security and
Medicare Tax Rates,” https://www.ssa.gov/oact/progdata/taxRates.html and https://www.ssa.gov/OACT/COLA/
cbb.html
Notes: Rates are for the Social Security payrol tax on covered earnings. Employees and employers pay an equal
tax on covered earnings (i.e., 6.2% on covered earnings in 2023). Employers did not receive a reduction in the
payrol tax rate during the temporary 2011-2012 employee rate reduction, meaning employers continued to pay
a tax of 6.2% of covered wages during those years.
The combined payroll tax rate multiplied by workers’ earnings up to the taxable maximum results
in payroll tax revenues for the program, its largest source of revenue.24 On an individual basis, the
payroll taxes paid by a worker are equal to the employee portion of the payroll tax (i.e., 6.2%)
multiplied by the individual’s covered earnings up to the taxable maximum. Figure 3 illustrates
the total (i.e., combined) amount of payroll taxes paid in nominal terms from 1981 through 2021
by hypothetical earners in the 1960 birth cohort. The line for each earner profile in Figure 3 is the
product of the combined payroll tax rate in a given year (Figure 2, the light grey line) and the
worker’s hypothetical earnings (Figure 1). As seen in the figure, payroll taxes paid are directly
related to earnings level. Said differently, a hypothetical high earner pays the same share but more
in absolute dollar amounts in payroll taxes than a hypothetical low earner does. Because a

24 For other sources of revenue, see CRS In Focus IF12375, Social Security: Selected Findings of the 2023 Annual
Report.
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maximum earner—by definition—always earns at the maximum taxable level in a given year,
Figure 3 also shows the maximum payroll taxes that could have been paid by such a worker in
the 1960 birth cohort.
Figure 3. Hypothetical Social Security Payroll Taxes for the 1960 Birth Cohort by
Worker Earnings Level, 1981-2026

Source: CRS.
Scheduled Benefits
The Social Security benefit computation process involves four main steps. First, a summarized
measure of lifetime Social Security–covered earnings is computed. This measure is called the
average indexed monthly earnings (AIME). Rather than using the amounts earned in past years
directly, the AIME computation process first updates past earnings to account for the growth in
overall economy-wide earnings. That is done by increasing each year of a worker’s taxable
earnings after 1950 by the growth in average wages in the economy, as measured by SSA’s AWI,
from the first year of work until two years prior to eligibility for benefits, which for retired
workers is at age 60. For instance, the national average wage grew from $32,155 in 2000 to
$41,674 in 2010. So, if a worker earned $20,000 in 2000 and turned 60 in 2010, the indexed wage
for 2000 would be $20,000 × ($41,674/$32,155), or $25,921. After indexing each year, the
highest 35 years of indexed earnings are summed and divided by 420 (the number of months in
35 years) to produce the AIME—a monthly measure of indexed past earnings.
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Second, a progressive benefit formula is applied to the AIME to compute the primary insurance
amount (PIA). To compute the PIA, the AIME is sectioned into three brackets (or segments) of
earnings by two specified dollar amounts known as bend points. The bend points are indexed to
the AWI, so they generally increase each year.25 Three factors—fixed by law at 90%, 32%, and
15%—are applied to the three brackets of AIME to allow for a progressive benefit formula. That
is, the lowest bracket of the AIME is replaced at 90%, the middle bracket of the AIME is replaced
at 32%, and the highest bracket of AIME is replaced at 15%. The sum of the three products
(bracket of earnings multiplied by its respective replacement rate) is the PIA. Table 1 shows the
resulting AIME and PIA calculation using the hypothetical workers’ earnings from Figure 1.
Table 1. Social Security Benefit Formula for Hypothetical Workers Born in 1960
Average Indexed
Monthly Earnings
Very Low
Low
Medium
High
Maximum
Factor
(AIME)
($1,155)
($2,080)
($4,623)
($7,396)
($11,430)
90%
of the first $1,024, plus
921.60
921.60
921.60
921.60
921.60
32%
of AIME over $1,024 and
through $6,172 (if any), plus
41.92
377.92
1,151.68
1,647.36
1,647.36
15%
of AIME over $6,172 (if any)
0.00
0.00
0.00
183.60
788.70
Total: Worker’s Primary
Insurance Amount (PIA)
963.50
1,259.50
2,073.20
2,752.50
3,357.60
Source: CRS, based on SSA, Office of the Chief Actuary (OCACT), “Benefit Formula Bend Points,”
https://www.ssa.gov/oact/cola/bendpoints.html.
Notes: The bend points shown in the table apply to workers who first become eligible in 2022. Under current
law, PIA is rounded down to the nearest dime (42 U.S.C. §415(a)(1)(A)). The AIMEs used in this table use
career-average earnings for the hypothetical workers discussed in Table A-1.
Third, an adjustment may be made based on the age at which a beneficiary chooses to begin
receiving benefits. For retired workers who claim benefits at the full retirement age (FRA), the
monthly benefit equals the PIA adjusted by annual cost-of-living adjustments (COLAs). Retired
workers who claim benefits earlier than the FRA receive monthly benefits that are lower than the
PIA (i.e., an actuarial reduction).26 The FRA for workers born in 1960 and later is 67. The earliest
eligibility age—the age at which a retired worker can first claim benefits—is 62. The actuarial
reduction equals five-ninths of 1% for each month (6⅔% per year) for the first three years of
early claim and five-twelfths of 1% for each month (5% per year) beyond 36 months. For
instance, a worker born in 1960 (FRA of 67) claiming at age 62 (60 months before FRA) would
receive 70% of his or her PIA plus any COLAs. Those who claim later than the FRA receive
benefits higher than the PIA. The permanent increase in monthly benefits that applies to those
who claim after the FRA is called the delayed retirement credit.27 For people born in 1943 and

25 Bend points are indexed to the AWI and can decreased when the AWI decreases (42 U.S.C. §415(a)(1)(B)). For
more information on effects of wage indexing and price indexing on benefits, see CRS Report R46819, Social Security:
The Effects of Wage and Price Indexing on Benefits.
26 The permanent reduction in benefits resulting from actuarial reductions takes into account the longer expected period
of benefit receipt. That is, a worker claiming benefits at age 62—the early eligibility age—would receive a lower
benefit but over a longer period of time, on average. Although life expectancies have generally increased during SSA’s
history, gains in life expectancy have not been equally distributed across sex, race, educational attainment, and income
level.
27 Delayed retirement credits result in higher benefit amounts. That is, a worker claiming benefits at age 70 would
receive a higher benefit than the same worker claiming benefits at age 67. However, with the same life expectancy, the
former would result in a shorter period of benefit collection.
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later, that credit is 8% for each year of delayed claim after the FRA up to age 70. Thus, a worker
born in 1960 (FRA of 67) claiming at age 70 (36 months after FRA) would receive 124% of his
or her PIA plus any COLAs.
Lastly, a COLA is applied to the benefit beginning in the second year of eligibility, which for
retired workers is age 63. The COLA applies even if a worker has not yet begun to receive
benefits. The COLA equals the growth in the Consumer Price Index for Urban Wage Earners and
Clerical Workers (CPI-W) from the third quarter of one calendar year to the third quarter of the
next calendar year.28 The COLA becomes effective in December of the current year and is
payable in January of the following year.29
Figure 4 illustrates the projected monthly benefit amount for each hypothetical earner type of the
1960 birth cohort in nominal dollars assuming benefit collection starting at the FRA (i.e., PIAs
adjusted by projected annual COLAs). Benefit amounts for each earner profile increase over time,
reflecting the COLA adjustment. The same rate of adjustment is applied to all workers in each
year.

28 COLAs cannot be less than zero. That is, in years where there is no increase in the price index over the measurement
period, no COLA is payable. This happened in 2010, 2011, and 2016.
29 Retired-worker benefits can be affected by other adjustments. For example, the windfall elimination provision can
reduce benefits for individuals who receive pensions based on employment not covered by Social Security, and benefits
can be temporarily withheld under the retirement earnings test if a beneficiary under the FRA continues to work and
earns above a certain amount. Although not an adjustment, the individual income tax can affect Social Security
beneficiaries with substantial non–Social Security income and, thus, the beneficiary’s net income. For more
information, see CRS Report 94-803, Social Security: Cost-of-Living Adjustments and CRS Report RL32552, Social
Security: Taxation of Benefits.
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Figure 4. Projected Hypothetical Scheduled Social Security Benefits for the 1960
Birth Cohort in Nominal Monthly Amounts by Worker Earnings Level, 2027-2046

Source: CRS.
Notes: The earners in this figure are assumed to have claimed benefits at the FRA. COLAs are based on the
trustees’ 2023 intermediate assumptions.

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Hypothetical Earnings, Payroll Taxes, and Benefits Across Birth
Cohorts
Over its history, the AWI has increased in all but one year (2009), and it has increased at an
average annual rate of 4.5%.30 Given this, and the method used to compute hypothetical earnings,
the wages of hypothetical earners are expected to increase from one birth cohort to the subsequent
birth cohort. Said differently, a worker who consistently earned medium wages and was born in
2000 will likely have higher nominal earnings than will a worker who consistently earned
medium wages and was born in 1980.
Additionally, as nominal earnings have generally increased, the hypothetical payroll taxes paid by
more recent birth cohorts are also expected to increase relative to previous birth cohorts. As
discussed, the payroll taxes paid are the payroll tax rate multiplied by earnings, which typically
increase from one birth cohort to the subsequent birth cohort. Thus, the payroll taxes paid by a
medium earner born in 2000 over his or her career are expected to be more than those of a
medium earner born in 1980.
Lastly, after accounting for differences in earning levels, Social Security benefits are generally
higher for workers in later cohorts. This is largely due to the increase in average wages over time,
both overall and within hypothetical earner profiles, but may also be due to differences in AWI
growth for different cohorts. As noted earlier, benefit amounts are a function of earnings received
in each year of a worker’s career and the growth rate in the AWI over the course of that career,
among other factors (e.g., COLA adjustments, timing of claims relative to the FRA). To the extent
that the AWI grows at different rates over time, benefit amount calculations will vary across
cohorts, even for two workers born in different years with identical earnings histories. In sum, a
worker who consistently earned medium wages born in 2000 will likely have a higher benefit
amount than a worker who consistently earned medium wages and was born in 1980, because
wage growth over this timespan (i.e., 1980-2000) was positive and the rate of AWI growth also
varied.
For these reasons, the ensuing analysis presents results for hypothetical earners in four birth
cohorts: 1960, 1980, 2000, and 2020. In each case, the same set of SSA-developed scaled factors
are used to define earner profiles, where the scaled factors are applied to age-specific AWIs.31

30 For more information, see CRS In Focus IF11599, Social Security Benefits and the Effect of Declines in Average
Wages and Prices.
31 For some younger cohorts, not all program factors are known. In this case, this methodology uses the intermediate
assumptions published in the 2023 Annual Report. The intermediate set of assumptions represents the trustees’ best
estimate of likely future conditions.
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Select Measures for Hypothetical Earners Across Birth Cohorts
Table 2 presents selected measures used to describe the
Discount Rates
Social Security benefits and payroll taxes: effective benefit
Benefits, taxes, and earnings in this
rate, effective tax rate, and benefit-to-tax ratio. The first
report are indexed to 2022 dol ars using
two measures—the effective benefit rate and the effective
a nominal interest rate equal to the rate
tax rate—each use the hypothetical worker’s total lifetime
of inflation (i.e., a zero real interest
rate). Indexed amounts are then used to
earnings as the denominator. Expressing total benefits and
calculate effective benefit rates, effective
taxes as a percentage of an individual’s career-covered
tax rates, and benefit-to-tax ratios. The
earnings accounts for growth in wages over time (i.e.,
choice of discount rate can have
across birth cohorts) and allows for meaningful
substantial effects on calculations. A
comparisons across groups. These rates and the ratio are
discussion of discount rates can be found
in the Appendix.
provided for four birth cohorts (1960, 1980, 2000, and
2020) under current law (i.e., scheduled amounts).
Effective Benefit Rate
The effective benefit rate measures
Claiming Age
how much a worker is expected to
All workers in this report are assumed to claim benefits at their
collect in lifetime benefits as a
FRAs (age 67). In reality, not all workers col ect benefits at their
percentage of his or her total career-
FRAs. Data shows that claiming ages are generally clustered
covered earnings, up to the taxable
around age 62 (i.e., the earliest eligibility age), the ful retirement
age, and age 70 (i.e., the age at which delayed retirement credits
maximum if applicable. All workers
are no longer credited).32 The FRA is 67 for all birth cohorts 1960
in this report are assumed to claim
and later. Some researchers have used age 65 for their analyses.33
benefits at their FRAs (age 67).34
For example, the (scheduled) effective benefit rate for a very low earner in the 1960 birth cohort
is estimated to be 40.8% (i.e., estimated lifetime benefits of $233,062 compared to estimated
lifetime earnings of $571,25935). In comparison, the (scheduled) effective benefit rate for a very
low earner in the 1980 birth cohort is estimated to be 45.7% (i.e., estimated lifetime benefits of
$322,628 compared to estimated lifetime earnings of $705,308). A comparison of the two rates
reveals that workers in the younger (1980) cohort are expected to receive total benefits that are a
higher share of their career earnings than the older cohort (1960).
Variations in (scheduled) effective benefit rates between similar earners of different birth cohorts
are largely attributable to differences in average life expectancy and the index factors used to
calculate a worker’s AIME.36

32 For more information on age distribution of new retired-worker beneficiaries, see CRS Report R44670, The Social
Security Retirement Age.
33 See, for example, Michael Clingman, Kyle Burkhalter, and Chris Chaplain, Money’s Worth Ratios Under the OASDI
Program for Hypothetical Workers, OCACT, April 2022, https://www.ssa.gov/OACT/NOTES/ran7/an2021-7.pdf; and
C. Eugene Steuerle and Karen E. Smith, “Social Security and Medicare Benefits and Taxes: 2023,” Urban Institute,
https://www.urban.org/sites/default/files/2023-10/
Social%20Security%20and%20Medicare%20Benefits%20and%20Taxes%202023.pdf.
34 This analysis considers retired-worker benefits only, assumed to be claimed at the FRA. It does not consider
disability benefits that may have been claimed prior to the FRA, nor does it consider auxiliary benefits (either accruing
to other family members on the retired worker’s record or accruing to the retired worker from another family member’s
record).
35 Amounts are in 2022 dollars.
36 For instance, Table 2 shows the effective benefit rates for medium earners in the 1960, 1980, 2000, and 2020 birth
(continued...)
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In all cases, workers are assumed to first claim benefits at the FRA,
Life Expectancy
or age 67. Each cohort’s life expectancy is calculated as the gender-
In general, females have a
adjusted average life expectancy at age 67. For example, the cohort
longer life expectancy. For
life expectancy at age 67 for a male born in 1960 is 17.88 years, and
example, at age 67, more
females of a birth cohort are
the cohort life expectancy at age 67 for a female born in 1960 is
expected to survive to 68
20.29 years. The simple average is 19.09 years, but the gender-
(and future years) than
adjusted average is 19.16 years (or 19 years and 2 months).38 This
males. Thus, to calculate
method of calculation will represent a birth cohort’s life expectancy
average life expectancy, this
at age 67 on average. Life expectancies are generally projected to
report uses a gender-
adjusted life expectancy that
increase over time. For example, gender-adjusted average life
is an average weighted by
expectancy at age 67 for the 1980 birth cohort is 20 years and 3
gender. This method is
months. The average expectancy continues to increase for the 2000
consistent with previous
birth cohort (21 years and 4 months) and more still for the 2020 birth
research.37
cohort (22 years and 3 months).39
Effective Tax Rate
The effective tax rate measures how much a
Payroll Taxes
worker paid into the system as a percentage of
To calculate the effective tax rate, this report includes
his or her total career-covered earnings, up to
the total OASDI payrol tax. The payrol tax burden is
the taxable maximum if applicable. Only
often believed to fall on workers as the employer’s
payroll taxes through age 66 are included in
share of payrol taxes is passed on to employees in the
form of lower wages (see footnote 18). As such, some
this measure as the worker is assumed to
research has included total combined OASDI payrol
begin benefit collection at age 67.
taxes (12.4%), while other research has included only
the combined portion of the OASI payrol tax
For example, the (scheduled) effective tax rate
(10.6%).40
for a medium earner in the 1960 birth cohort is
estimated to be 12.19% (i.e., estimated
lifetime taxes of $278,615 compared to estimated lifetime earnings of $2,284,749). In
comparison, the (scheduled) effective tax rate for a medium earner in the 1980 birth cohort is
estimated to be 12.33% (i.e., estimated lifetime taxes of $347,791 compared to estimated lifetime
earnings of $2,820,879). A comparison of the two rates reveals that workers in the younger (1980)
cohort are expected to experience a higher effective tax rate than the older cohort (1960).
Variations in (scheduled) effective tax rates represent changes in the statutory payroll tax rate (see
Figure 2).

cohorts to be 22.0%, 24.6%, 25.7%, and 26.7%, respectively. Under the hypothetical situation in which all cohorts were
to experience the same gender-adjusted life expectancy at age 67 of 19 year and 2 months (i.e., the same as the 1960
birth cohort), the effective benefit rates would be 22.0%, 23.3%, 23.1%, and 23.0%, respectively. The remaining
differences in effective benefit rates are explained by variations in the historical versus projected AWI values used to
calculate a worker’s AIME.
37 See footnote 33.
38 This calculation uses projections included in “cohort life tables.” OCACT, “Cohort Life Tables,” 2023,
https://www.ssa.gov/OACT/HistEst/CohLifeTablesHome.html.
39 For this analysis, the same average life expectancy is applied to all members of a birth cohort, regardless of income
or other demographic factors. Although life expectancies have generally increased year to year, the gains in life
expectancy have not been evenly distributed across demographic factors such as income, race, and educational
attainment. For more information, see CRS Report R44846, The Growing Gap in Life Expectancy by Income: Recent
Evidence and Implications for the Social Security Retirement Age.
40 See footnote 33. For current law tax rates, see https://www.ssa.gov/oact/progdata/oasdiRates.html.
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Benefit-to-Tax Ratio
The benefit-to-tax ratio is the lifetime value of a worker’s benefits received divided by the
lifetime value of taxes paid by the worker. Mathematically, it is equivalent to the effective benefit
rate divided by the effective tax rate.
For example, the (scheduled) benefit-to-tax ratio for a high earner in the 1960 birth cohort is
estimated to be 1.49 (i.e., estimated lifetime benefits of $665,895 compared to estimated lifetime
taxes of $445,775). In comparison, the (scheduled) benefit-to-tax ratio for a high earner in the
1980 birth cohort is estimated to be 1.66 (i.e., estimated lifetime benefits of $921,518 compared
to estimated lifetime taxes of $556,459).41 A comparison of the two ratios reveals that workers in
the younger (1980) cohort are expected to have a higher benefit-to-tax ratio than the older cohort
(1960).
Scheduled Benefits and Taxes Under Current Law
Table 2 shows how these scheduled measures—effective benefit rate, effective tax rate, benefit-
to-tax ratio—are expected to vary by hypothetical earnings level for the selected birth cohorts:
1960, 1980, 2000, and 2020. The effective benefit rate is higher for relatively low earners than for
relatively higher earners. This illustrates the benefit formula’s progressivity: A higher share of
earnings is replaced for workers with lower career earnings than for those with higher career
earnings. It also shows that, within a given hypothetical earner profile, the effective benefit rate is
higher for younger cohorts.42
In Table 2, the effective tax rate reflects the payroll tax rate on a worker’s career covered
earnings. This rate differs from the current payroll tax rate for some workers because the rate has
changed over time. A hypothetical earner born in 1960 entered the workforce in 1981 at age 21.
In 1981, the combined payroll tax rate for workers was 10.7%. The payroll tax rate gradually
increased until it reached 6.2% in 1990. Thus, for several years the 1960 birth cohort paid into the
system at a lower tax rate than subsequent birth cohorts did. Additionally, in the aftermath of the
2007-2009 recession, Congress passed temporary reductions on the employee payroll tax rate.
The employee tax rate was reduced by 2 percentage points in 2011 (by P.L. 111-312) and in 2012
(by P.L. 112-78 and P.L. 112-96).43
For most taxpayers, payroll tax burdens are proportional to earnings. Due to the cap on earnings
subject to the payroll tax, payroll taxes are regressive to the extent they do not apply to earnings
above the taxable maximum. This means that, as taxpayers’ earnings increase above the taxable
maximum, the share of earnings paid in payroll taxes decreases.44 Also important is that the

41 Alternatively, this could be calculated by dividing the worker’s effective benefit rate (20.4%) by the effective tax rate
(6.13%).
42 As discussed, this is primarily attributed to increases in life expectancy.
43 These temporary employee payroll tax decreases included provisions for General Fund transfers to the Social
Security trust funds so they would be “made whole.” See footnote 20.
44 According to estimates from CBO, in 2018, households in the lowest quintile (earning an average of $22,500) paid
9.5% of their income in payroll taxes, whereas households in the highest quintile (earning an average of $321,700) paid
6.4% of their income in payroll taxes. These figures include all federal payroll taxes, such as the (smaller) federal
Medicare Hospital Insurance tax and federal unemployment taxes. In FY2020, the Social Security tax raised 74% of all
federal payroll tax receipts. For distribution figures, see CBO, The Distribution of Household Income, 2018,
supplemental data tables 3 and 9 (published August 4, 2021), https://www.cbo.gov/publication/57061.
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Social Security tax is levied only on wage income, and non-wage income is not reflected in the
estimates in this report.45
Table 2. Effective Benefit Rate, Effective Tax Rate, and Benefit-to-Tax Ratio for
Hypothetical Earners by Birth Cohort Under Current Law
Under 2023 Intermediate Assumptions
Very Low
Medium
Maximum
Birth Cohort
Earner
Low Earner
Earner
High Earner
Earner
Effective Benefit Rate
1960
40.8%
29.6%
22.0%
18.2%
13.4%
1980
45.7%
33.2%
24.6%
20.4%
15.0%
2000
47.7%
34.7%
25.7%
21.3%
15.8%
2020
49.7%
36.1%
26.7%
22.2%
16.4%
Effective Tax Rate
1960
12.19%
12.19%
12.19%
12.19%
12.14%
1980
12.33%
12.33%
12.33%
12.33%
12.33%
2000
12.40%
12.40%
12.40%
12.40%
12.40%
2020
12.40%
12.40%
12.40%
12.40%
12.40%
Benefit-to-Tax Ratio
1960
3.35
2.43
1.80
1.49
1.10
1980
3.71
2.69
1.99
1.66
1.22
2000
3.85
2.79
2.07
1.72
1.28
2020
4.01
2.91
2.16
1.79
1.33
Source: CRS calculations based on hypothetical earner profiles developed by OCACT. Calculations assume
scheduled benefits and payrol taxes paid under the 2023 intermediate assumptions and current law.
Notes: The effective benefit rate is calculated as total benefits received divided by total career covered earnings.
The effective tax rate is calculated as total payrol taxes paid divided by total career covered earnings. Total
benefits received and total taxes paid are in 2022 dol ars. The benefit-to-tax ratio is calculated as total benefits
received divided by total taxes paid.
Projected Exhaustion of the Trust Funds
From 1983 through 2009, Social Security operated with cash surpluses wherein tax revenues
exceeded program expenses. Each of those year’s cash surpluses was invested in government

45 Taxpayers with higher incomes, such as a hypothetical maximum earner, are more likely to have income that is not
subject to the Social Security tax (i.e., income that is not taxable nor creditable for program purposes), such as income
from dividends, capital gains, interest, or rent. According to CBO analysis of incomes in 2019, labor income (i.e., wage
and salary) made up at least 62% of average market income for households in the lower 95% of the income
distribution. Labor income comprised nearly 58% of market income for households in the 96th-99th percentiles. At
almost 32%, labor earnings make up a lower (but still significant) share of market income among households in the top
1%. CBO defines market income as labor income, business income, capital gains realized from the sale of assets,
capital income excluding capital gains, and income received in retirement for past services or from other sources.
Conceptually, these percentages may underestimate total labor income because they exclude business income, and
some business owners contribute labor to their firms and are compensated in the form of business income in lieu of
wages. CBO, The Distribution of Household Income and Federal Taxes, 2019, November 2022, supplemental data,
https://www.cbo.gov/publication/58353.
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securities and earned interest. (At the start of 2023, the combined trust fund balance was $2.83
trillion.) Since 2010, the Social Security program has operated with cash deficits (i.e., expenses
exceed tax revenues).46 However, from 2010 through 2020, the program still ran annual surpluses
where total income (i.e., tax revenues plus interest on assets held in the trust funds balance)
exceeded expenses. Augmenting tax revenues with interest income from asset reserves held in the
trust funds allowed full scheduled benefits to be paid without redeeming assets held in the trust
funds. In 2021, Social Security experienced its first annual deficit since 1982: In 2021, tax
revenues plus interest income could not support total expenses. Consequently, in 2021, Social
Security was obligated to redeem asset reserves held in the trust funds to provide the additional
$56 billion that was needed to pay scheduled benefits in that year. In 2022, a further $22 billion in
asset reserves needed to be redeemed to pay full scheduled benefits. Given the trustees
intermediate projections of rising costs—and rising annual deficits—the program is expected to
redeem an increasing amount of assets in future years. Growing annual deficits are projected
through 2034, the projected year of asset reserve depletion.
The projected increasing annual deficits imply that Social Security will experience a weaker
financial position with each year. Eventually, if the future experience unfolds in a manner similar
to the trustees’ intermediate assumptions, the program will be unable to pay full scheduled
benefits. To demonstrate the extent of the projected financial shortfall, the trustees estimate
changes in the payroll tax rate and benefits that would be required to keep the trust funds solvent.
For instance, in their 2023 Annual Report, they state:
To illustrate the magnitude of the 75-year actuarial deficit, consider that for the combined
OASI and DI Trust Funds to remain fully solvent throughout the 75-year projection period
ending in 2096: (1) revenue would have to increase by an amount equivalent to an
immediate and permanent payroll tax rate increase of 3.44 percentage points to 15.84
percent beginning in January 2023; (2) scheduled benefits would have to be reduced by an
amount equivalent to an immediate and permanent reduction of 21.3 percent applied to all
current and future beneficiaries effective in January 2023, or 25.4 percent if the reductions
were applied only to those who become initially eligible for benefits in 2023 or later; or (3)
some combination of these approaches would have to be adopted.
If substantial actions are deferred for several years, the changes necessary to maintain
Social Security solvency would be concentrated on fewer years and fewer generations.
Significantly larger changes would be necessary if action is deferred until the combined
trust fund reserves become depleted in 2034. For example, maintaining 75-year solvency
through 2097 with changes that begin in 2034 would require: (1) an increase in revenue by
an amount equivalent to a permanent 4.15 percentage point payroll tax rate increase to
16.55 percent starting in 2034, (2) a reduction in scheduled benefits by an amount
equivalent to a permanent 25.2 percent reduction in all benefits starting in 2035, or (3)
some combination of these approaches.47
Table 3 displays how these hypothetical estimates have changed in the 10-year period from 2014
through 2023. As shown, the estimated payroll tax rate increase and estimated benefit reduction to

46 Under the Board of Trustees’ intermediate assumptions, the trustees project cash deficits for the remainder of the 75-
year projection period (2023 Annual Report, p. 2).
47 “The 3.44 percentage point increase in the payroll tax rate required to achieve 75-year solvency through 2097 differs
somewhat from the 3.61 percent actuarial deficit. This is primarily because the rate increase required to achieve 75-year
solvency reflects a zero trust fund reserve at the end of the period in 2097, whereas the 3.61 percent actuarial deficit
incorporates an ending trust fund reserve equal to one year’s cost. While such an increase in the payroll tax rate would
cause some behavioral changes in earnings and ensuing changes in benefit levels, such changes are not included in
these calculations because they are assumed to have roughly offsetting effects on OASDI actuarial status over the 75-
year long-range period as a whole” (2023 Annual Report, pp. 5-6).
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maintain solvency—in both immediate and delayed (at the time of projected insolvency)
scenarios—have increased. This characteristic is reflective of the program’s rising costs.
Table 3. Estimated Hypothetical Measures to Maintain Trust Fund Solvency Under
Four Scenarios Proposed by the Social Security Board of Trustees
2014-2023, in Percentage Points (pp) and Percent (%)

Scenario 1
Scenario 2
Scenario 3
Scenario 4

Projected
Long-
Immediate
Immediate
Delayed
Delayed
Year of Asset
Range
Year of
Payroll Tax
Benefit
Payroll Tax
Benefit
Reserve
Actuarial
Report
Increase (pp)
Reduction
Increase (pp)
Reduction
Exhaustion
Balance
2014
2.83
17.4%
4.20
23%
2033
-2.88%
2015
2.62
16.4%
3.70
21%
2034
-2.68%
2016
2.58
16.0%
3.58
21%
2034
-2.66%
2017
2.76
17.0%
3.98
23%
2034
-2.83%
2018
2.78
17.0%
3.87
23%
2034
-2.84%
2019
2.70
17.0%
3.65
23%
2035
-2.78%
2020
3.14
19.0%
4.13
25%
2035
-3.21%
2021
3.36
21.0%
4.20
26%
2034
-3.54%
2022
3.24
20.0%
4.07
25%
2035
-3.42%
2023
3.44
21.3%
4.15
25%
2034
-3.61%
Source: CRS, compiled from Board of Trustees Annual Reports from 2014 to 2023.
Notes: Estimated payrol tax increases are the combined employer and employee tax rate increases (i.e., if the
payrol tax rate were to have increased in 2023 according to the table, the employer and employee would each
have had to pay an additional 1.72 percentage points [half of 3.44 percentage points]). Delayed actions are
estimated for implementation in the projected year of asset reserve depletion. The program’s long-range financial
status is measured by the actuarial balance, which is the difference between the summarized cost rate and the
summarized income rate over the 75-year projection period. The summarized cost rate and the summarized
income rate are expressed as a percentage of taxable payrol . Taxable payrol is a weighted sum of taxable wages,
including wages from self-employment. Taxable payrol multiplied by the payrol tax rate yields the total amount
of payrol taxes. The long-range actuarial balance is generally of greater magnitude than the immediate payrol tax
increase, as it incorporates a trust fund reserve of at least one year’s projected cost.
The remainder of this report considers the impact on workers of these hypothetical changes across
earnings levels and birth cohorts for each of the four hypothetical policy scenarios presented for
2023 in Table 3. These impacts are presented in terms of the percentage point change in the
effective benefit rate and effective tax rate and the change to the benefit-to-tax ratio (a unitless
measure).
Solvency Measures
Hypothetical solvency measures (i.e., immediate and delayed payrol tax rate increases or benefit cuts) il ustrate
the magnitude of the projected financial shortfall. In practice, there are many more solvency-related measures
available to lawmakers. For instance, eliminating the taxable maximum would subject more money to the payrol
tax, thereby increasing revenues. Alternatively, increasing the FRA would reduce costs. The Social Security
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Amendments of 1983 (P.L. 98-21), commonly considered the last major reform to the Social Security program,
extended the program’s solvency by a combination of revenue-increasing and cost-reducing measures.48
Treatment of COLAs in Analysis of the Board of Trustees’ Policy Scenarios
As stated above, the hypothetical scenarios presented in Table 3 are estimated to allow the
combined trust funds to “remain fully solvent” over the applicable future 75-year period. The
trustees “consider the trust funds to be solvent at any point in time if the funds can pay scheduled
benefits in full on a timely basis.”49 Under current law, scheduled benefits generally include
annual COLAs.
The Social Security COLA is based on the increase (if any) in the CPI-W over a specified
measurement period—that is, the increase in the CPI-W from the third quarter average for the
base calendar year (typically the previous calendar year) to the third-quarter average for the
current calendar year. The COLA becomes effective in December of the current year and is
payable in January of the following year. (Monthly benefits reflect the benefits due for the
preceding month.) In some years, there may be a decrease in the CPI-W over the measurement
period. Such was the case for COLAs computed in 2009, 2010, and 2015 (for benefits payable in
2010, 2011, and 2016, respectively). Social Security benefits are protected from a decrease in
average prices (i.e., a COLA cannot be negative). In those years, benefit amounts remained
unchanged.50
Under current law, COLAs are calculated using the CPI-W only when the trust fund ratio is
above 20%.51 The trust fund ratio is defined as the value of asset reserves (i.e., the combined trust
funds) at the beginning of a year divided by the program’s projected cost for that year. When the
trust fund falls below 20%, the AWI (i.e., change in average wages) is used to calculate any
payable COLA.52 Under the intermediate assumptions, the trust fund ratio is projected to decrease
from 25% in 2033 to 7% in 2034 (the projected year of asset reserve exhaustion).53
The projected trust fund ratios under each of the four hypothetical scenarios are unknown. For
example, it is unknown when the hypothetical immediate payroll tax increase scenario would
ensure a trust fund ratio that is above 20%. For this reason, the scheduled benefits projected under
current law (i.e., Table 2) and the COLAs in each of the four hypothetical scenarios presented in
this report are calculated using the projected COLAs based on projected changes to the CPI-W.
Immediate Payroll Tax Rate Increase Effective in
2023 (Scenario 1)
One hypothetical provision to ensure trust fund solvency—and the payment of full scheduled
benefits—throughout the 75-year projection period would have been an immediate (2023)

48 For more information on the Social Security Amendments of 1983 see CRS Report R47040, Social Security: Trust
Fund Status in the Early 1980s and Today and the 1980s Greenspan Commission.
49 2023 Annual Report, p. 41.
50 For more information, see CRS Report 94-803, Social Security: Cost-of-Living Adjustments.
51 42 U.S.C. §415(i)(1)(C).
52 From 1975, when automatic COLAs first became payable, through the 2023 COLA, the increase in AWI has been
larger than the COLA 16 times. Thus, using the AWI rather than the CPI-W to calculate COLAs may not always result
in a smaller (i.e., less costly) COLA.
53 See supplemental single-year Table IV.B4 at https://www.ssa.gov/OACT/TR/2023/lr4b4.html.
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increase in the payroll tax rate (see Table 3). Under the intermediate assumptions, the trustees
estimate that it would require a payroll tax rate increase of 3.44 percentage points (with
employees and employers each paying a 1.72 percentage point increase). Such a change would
require Congress to enact legislation to amend current law.
When examined over a career of covered employment, the tax burden created by an increase in
the payroll tax rate is not expected to be shared equally across worker age groups. Figure 5
shows how this would affect workers’ annual total payroll taxes by earnings levels and birth
cohorts. For each birth cohort—1960, 1980, 2000, and 2020—the amount of annual combined
payroll taxes increases by earnings level. That is, in each case, relatively high earners pay more in
payroll taxes than do relatively lower earners. This makes sense by definition: The payroll tax is
applied equally to all covered earnings. Because total payroll taxes paid are a function of the
payroll tax rate and covered wages, an increase in one necessarily increases the product of the
two.
Figure 5 also highlights how a hypothetical immediate payroll tax rate increase would affect
workers differently by birth cohort. As shown, the 1960 birth cohort would be affected for only a
few years. (They reach age 67—the Social Security FRA—in 2027.) Thus, the lifetime effective
payroll tax rate for these workers would be slightly higher than under current law. Other cohorts,
though, would bear more of the additional tax burden created by a hypothetical immediate tax
increase. For instance, Figure 5 shows that the 1980 birth cohort would be affected starting at age
43 (in 2023). This cohort would be subject to a higher payroll tax rate than under current law for
roughly half of their estimated time in paid labor. Thus, their effective tax rate would be higher
than those of the 1960 birth cohort but less than those of the 2000 and 2020 birth cohorts. The
2000 birth cohort would be subject to an immediate hypothetical tax increase for almost all of
their time in paid labor, and the 2020 birth cohort would be subject to an immediate hypothetical
tax increase for their entire time in paid labor. As such, these cohorts would pay more in lifetime
payroll taxes in nominal terms and experience a higher effective tax rate than would older birth
cohorts.
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Figure 5. Annual Combined Payroll Taxes by Birth Cohort and Worker Earnings
Level Under Current Law and Immediate (2023) Payroll Tax Increase
In Nominal Dollars

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Source: CRS.
Notes: The solid lines represent scheduled combined payrol taxes for hypothetical workers under current law
and the 2023 intermediate assumptions. The dotted lines represent projected combined payrol taxes for
hypothetical earners under an immediate increase in the combined payrol tax rate of 3.44 percentage points.
Under this scenario, the total payrol tax rate would be 15.84% on covered wages. The x-axes are different for
each birth cohort. However, the years correspond to ages 21-66 for each respective cohort (i.e., years of
expected participation in the labor force). Additionally, the y-axes display different dol ar values. This reflects the
growth in economy-wide earnings. That is, given the projected growth in economy-wide earnings, a medium
earner born in 2020 is expected to earn roughly 10 times more than is a medium earner born in 1960 in nominal
terms. (Hence the y-axes for the 2020 cohort exhibit a wider range of values than the y-axes for the 1960
cohort.) Therefore, younger workers wil pay more in total payrol taxes in nominal terms. However, as shown
in Table 2, all cohorts are subject to the same scheduled payrol tax rate under current law.
An immediate payroll tax rate increase would not affect a beneficiary’s—current or future—
projected benefit level. However, as shown in Figure 5, it would affect the estimated total payroll
taxes paid. This combination of effects is further highlighted in Table 4, which presents the
changes in the selected measures (i.e., effective benefit rate, effective tax rate, and benefit-to-tax
ratio) from scheduled amounts discussed earlier. Table 4 shows that the effective benefit rates
remained unchanged from Table 2. The effective tax rate, however, increases for all birth cohorts.
Because this scenario assumes a payroll tax rate increase in 2023, the 1960 birth cohort is subject
to an additional tax burden for only four years. The 1980 birth cohort would experience a higher
payroll tax rate for about half of their years in paid labor (from 2023 to roughly 2041). Thus, their
effective tax rate is between that of the 1960 birth cohort and the 2000 and 2020 birth cohorts.
The 2000 birth cohort would experience the higher payroll tax rate for almost all their time in
paid labor, whereas the 2020 birth cohort would experience the higher rate for all of their time in
paid labor.
Because the 1960 birth cohort would be affected the least among the four cohorts analyzed, their
benefit-to-tax ratios are likewise affected the least. The 1980 birth cohort would experience
modestly higher taxes and a higher effective tax rate. However, the changes in the benefit-to-tax
ratios for the 1980 cohort are comparatively smaller under an immediate tax increase scenario
than the changes for the younger 2000 and 2020 cohorts. For instance, the benefit-to-tax ratio for
a medium earner born in 1980 is projected to decrease by 0.30 (-14.90%) under an immediate tax
increase scenario (Table 4). The younger cohorts would experience the largest increases in taxes
and effective tax rates under an immediate tax rate scenario. As such, their benefit-to-tax ratios
decrease the most when compared to scheduled amounts. For instance, the benefit-to-tax ratio for
a medium earner born in 2020 is projected to decline by 0.47 (-21.72%) under an immediate tax
increase scenario.

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Table 4. Immediate (2023) Payroll Tax Increase: Change and Percentage Change in
Effective Benefit Rate, Effective Tax Rate, and Benefit-to-Tax Ratio for Hypothetical
Earners by Birth Cohort
Under the 2023 Intermediate Assumptions
Birth Cohort
Very Low
Low Earner
Medium
High Earner
Maximum
Earner
Earner
Earner
Change (in Percentage Points [pp]) and Percentage Change (%) in Effective Benefit Rate
1960
0.00 pp
0.00 pp
0.00 pp
0.00 pp
0.00 pp
0.00%
0.00%
0.00%
0.00%
0.00%
1980
0.00 pp
0.00 pp
0.00 pp
0.00 pp
0.00 pp
0.00%
0.00%
0.00%
0.00%
0.00%
2000
0.00 pp
0.00 pp
0.00 pp
0.00 pp
0.00 pp
0.00%
0.00%
0.00%
0.00%
0.00%
2020
0.00 pp
0.00 pp
0.00 pp
0.00 pp
0.00 pp
0.00%
0.00%
0.00%
0.00%
0.00%
Change (in Percentage Points [pp]) and Percentage Change (%) in Effective Tax Rate
1960
0.31 pp
0.31 pp
0.31 pp
0.31 pp
0.36 pp
2.51%
2.51%
2.51%
2.51%
2.96%
1980
2.16 pp
2.16 pp
2.16 pp
2.16 pp
1.98 pp
17.51%
17.51%
17.51%
17.51%
16.10%
2000
3.40 pp
3.40 pp
3.40 pp
3.40 pp
3.33 pp
27.42%
27.42%
27.42%
27.42%
26.83%
2020
3.44 pp
3.44 pp
3.44 pp
3.44 pp
3.44 pp
27.74%
27.74%
27.74%
27.74%
27.74%
Change and Percentage Change (%) in Benefit-to-Tax Ratio
1960
-0.08
-0.06
-0.04
-0.04
-0.03
-2.45%
-2.45%
-2.45%
-2.45%
-2.88%
1980
-0.55
-0.40
-0.30
-0.25
-0.17
-14.90%
-14.90%
-14.90%
-14.90%
-13.87%
2000
-0.83
-0.60
-0.45
-0.37
-0.27
-21.52%
-21.52%
-21.52%
-21.52%
-21.16%
2020
-0.87
-0.63
-0.47
-0.39
-0.29
-21.72%
-21.72%
-21.72%
-21.72%
-21.72%
Source: CRS calculations based on hypothetical earner profiles developed by OCACT. Calculations assume
scheduled benefits paid under intermediate assumptions and current law and a payrol tax rate increase of 3.44
percentage points in 2023 and later years.
Notes: The effective benefit rate is calculated as total benefits received divided by total career covered earnings.
The effective tax rate is calculated as total taxes paid divided by total career covered earnings. Total benefits
received and total taxes paid are in 2022 dol ars. The benefit-to-tax ratio is calculated as total benefits received
divided by total taxes paid.
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Immediate Benefit Reduction Effective in 2023
(Scenario 2)
A second hypothetical provision to ensure trust fund solvency throughout the 75-year projection
period would have been an immediate (2023) reduction in benefits. Under the intermediate
assumptions, the trustees estimate that it would require an immediate benefit cut of 21.3% for all
current and future beneficiaries (see Table 3). Such a change would require congressional action.
Unlike an immediate payroll tax rate increase, the effects of an immediate benefit cut would be
shared more equally across the four birth cohorts used in this analysis. This is because all of the
workers in the selected birth cohorts would reach FRA after the implementation of an immediate
(2023) benefit cut. The oldest of the analyzed birth cohorts—1960—will not reach age 67 until
2027, whereas other birth cohorts are many years off. Thus, while the 1960 birth cohort would be
relatively less affected by an immediate payroll tax increase, the same pattern would not be the
case under an immediate benefit reduction (i.e., it is not the case that the benefit cut applies to
only some of the benefit years for the older cohorts). This expected outcome is presented in
Figure 6 in terms of monthly benefits.
For each cohort, Figure 6 shows that relatively higher earners are scheduled to receive higher
monthly benefit amounts than would relatively lower earners, as expected. This feature remains
after the hypothetical implementation of an immediate benefit reduction, because all workers
would face the same percentage benefit reduction (i.e., 21.3%). That is, a hypothetical benefit
reduction would “shift” the payable monthly benefits downward by about 21.3%. Although the
level of benefits paid to workers of different earnings levels would be lower than scheduled
amounts, the relatively higher earners still would receive more than relatively lower earners
would. Moreover, each birth cohort would experience the benefit reduction for the entirety of
their projected benefit collection periods. This is in contrast to effects of an immediate payroll tax
rate increase, which would affect the older cohorts—1960 and 1980—by relatively smaller
amounts.

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Figure 6. Monthly Benefits by Earnings Level and Birth Cohort Under Current Law
and Immediate (2023) Benefit Decrease
In Nominal Dollars

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Source: CRS.
Notes: The solid lines represent scheduled monthly benefits for hypothetical beneficiaries under current law
and the 2023 intermediate assumptions. The dotted lines represent projected monthly benefits for hypothetical
beneficiaries under an immediate benefit reduction of 21.3%. The x-axes are different for each birth cohort.
However, the years correspond to ages 67-87 for each respective cohort (i.e., years of expected benefit
col ection). Additionally, the y-axes display different dol ar values. This reflects the projected growth in benefit
amounts between generations due to projected growth in economy-wide earnings. That is, a medium earner
born in 2020 is expected to have higher scheduled benefits than is a medium earner born in 1960 in nominal
terms (hence the y-axes for the 2020 cohort exhibit a wider range of values than the y-axes for the 1960
cohort), although the benefit formula is the same.
An immediate benefit reduction would reduce all current and future beneficiaries’ projected
monthly benefits in a similar manner. That is, all beneficiaries across the different earnings levels
and birth cohorts would experience the same percentage decrease (i.e., 21.3%) in scheduled
benefits. In nominal terms, the difference between scheduled and payable benefits would be
relatively larger for the hypothetical higher earners, as shown in Figure 6. However, the
percentage point decline in the effective benefit rate is expected to be greater for lower earners
(Table 5), a pattern that persists across all birth cohorts. This outcome follows from the
progressivity of the benefit formula. That is, absent a benefit reduction, the effective benefit rate
for lower earners is greater than for higher earners (e.g., Table 2 shows that for the 1960 birth
cohort, the rate is 40.8% for very low earners and 13.4% for maximum earners). Consequently, in
terms of effective benefit rate, a 21.3% benefit reduction is more impactful for lower earners,
because the deduction is calculated on a higher base rate.54
Table 5 shows that the effective tax rates remained unchanged from Table 2 (because this
scenario does not raise or lower the payroll tax rate paid by workers). However, because effective
benefit rates fall for all worker groups in Table 5, so do benefit-to-tax ratios in all groups.55 For
instance, the medium earners born in 1980 would see their benefit-to-tax ratios decrease by 0.42
(-21.3%) under an immediate benefit reduction. Said differently, the lifetime benefits collected
versus lifetime taxes paid would be lower for medium earners born in 1980 under this scenario.
The decrease in benefit-to-tax ratios is largely consistent among birth cohorts when accounting
for differences in earnings level. The previous example showed the ratio for a medium earner
born in 1980 to decrease by 0.42. Similarly, the ratio for a medium earner born in 2000 is
estimated to decrease by 0.44. Likewise, a very low earner born in 1980 could expect his or her
benefit-to-tax ratio to decrease by 0.82, and a very low earner born in 2000 could expect his or
her benefit-to-tax ratio to decrease by 0.85. That is, the point decline in the benefit-to-tax ratio is
higher for relatively low earners. Because this scenario would be effective immediately (2023),
the percentage change in benefit-to-tax ratios (i.e., 21.3%) would be experienced similarly among
workers of different ages and earnings levels.

54 That is, 21.3% of 40.8% is 8.7 percentage points, and 21.3% of 13.4% is 2.9 percentage points (see Table 2). This is
largely caused by the progressivity in the Social Security benefit computation process (see “Scheduled Benefits”).
55 That is, because the numerator (i.e., total benefits) in each ratio falls, while the denominator (i.e., total taxes paid)
remains unchanged.
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Table 5. Immediate (2023) Benefit Reduction: Change and Percentage Change in
Effective Benefit Rate, Effective Tax Rate, and Benefit-to-Tax Ratio for Hypothetical
Earners by Birth Cohort
Under the 2023 Intermediate Assumptions
Birth Cohort
Very Low
Low Earner
Medium
High Earner
Maximum
Earner
Earner
Earner
Change (in Percentage Points [pp]) and Percentage Change (%) in Effective Benefit Rate
1960
-8.69 pp
-6.31 pp
-4.68 pp
-3.88 pp
-2.85 pp
-21.30%
-21.30%
-21.30%
-21.30%
-21.30%
1980
-9.74 pp
-7.07 pp
-5.24 pp
-4.35 pp
-3.20 pp
-21.30%
-21.30%
-21.30%
-21.30%
-21.30%
2000
-10.17 pp
-7.38 pp
-5.47 pp
-4.54 pp
-3.37 pp
-21.30%
-21.30%
-21.30%
-21.30%
-21.30%
2020
-10.59 pp
-7.69 pp
-5.69 pp
-4.72 pp
-3.50 pp
-21.30%
-21.30%
-21.30%
-21.30%
-21.30%
Change (in Percentage Points [pp]) and Percentage Change (%) in Effective Tax Rate
1960
0.00 pp
0.00 pp
0.00 pp
0.00 pp
0.00 pp
0.00%
0.00%
0.00%
0.00%
0.00%
1980
0.00 pp
0.00 pp
0.00 pp
0.00 pp
0.00 pp
0.00%
0.00%
0.00%
0.00%
0.00%
2000
0.00 pp
0.00 pp
0.00 pp
0.00 pp
0.00 pp
0.00%
0.00%
0.00%
0.00%
0.00%
2020
0.00 pp
0.00 pp
0.00 pp
0.00 pp
0.00 pp
0.00%
0.00%
0.00%
0.00%
0.00%
Change and Percentage Change (%) in Benefit-to-Tax Ratio
1960
-0.71
-0.52
-0.38
-0.32
-0.23
-21.30%
-21.30%
-21.30%
-21.30%
-21.30%
1980
-0.79
-0.58
-0.43
-0.35
-0.26
-21.30%
-21.30%
-21.30%
-21.30%
-21.30%
2000
-0.82
-0.60
-0.44
-0.37
-0.27
-21.30%
-21.30%
-21.30%
-21.30%
-21.30%
2020
-0.85
-0.62
-0.46
-0.38
-0.28
-21.30%
-21.30%
-21.30%
-21.30%
-21.30%
Source: CRS calculations based on hypothetical earner profiles developed by OCACT. Calculations assume an
immediate benefit reduction of 21.3% effective in 2023.
Notes: The effective benefit rate is calculated as total benefits received divided by total career covered earnings.
The effective tax rate is calculated as total taxes paid divided by total career covered earnings. Total benefits
received and total taxes paid are in 2022 dol ars. The benefit-to-tax ratio is calculated as total benefits received
divided by total taxes paid.
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Payroll Tax Rate Increase Effective in 2034 (Scenario
3)
A third hypothetical provision to ensure trust fund solvency—and the payment of full scheduled
benefits—throughout the 75-year projection period would be a delayed (2034) increase in the
payroll tax rate (see Table 3). Under the intermediate assumptions, the trustees estimate that it
would require a combined payroll tax rate increase of 4.15 percentage points (with employees and
employers each paying a 2.075 percentage point increase). This would increase the combined
payroll tax from 12.4% under current law to 16.55%.56 Such a change would require
congressional action. Dissimilar to the first two scenarios, the effects of a delayed payroll tax rate
increase would be shared more unequally across the four birth cohorts used in this analysis.
Figure 7 shows how this would affect workers of varying earnings levels and birth cohorts.
Similar to an immediate (2023) tax increase, the 1960 birth cohort is unaffected by a delayed tax
increase. That birth cohort will turn 75 in 2035 and will likely be collecting benefits as opposed to
earning wages subject to the payroll tax. The 1980 birth cohort would be subject to a delayed
increase in the payroll tax rate but only for a portion of its time in paid labor. This birth cohort
would turn 54 in 2034 and would become eligible for full benefits, at age 67, in 2047. Thus, it
would be subject to the payroll tax rate increase for about a 13-year period. The 2000 birth
cohort, on the other hand, would be subject to a hypothetical delayed increase in the payroll tax
rate for a substantial portion of its estimated time in paid labor. This birth cohort would turn 34 in
2034 and, thus, would still be 33 years from becoming eligible to collect full Social Security
benefits. As such, it would be paying a higher effective tax rate for longer than the older birth
cohorts. Of the four birth cohorts analyzed in this report, the 2020 birth cohort would see the
largest increase in payroll taxes in nominal terms, as it would be subject to the delayed increase
for the entirety of its expected time in the paid labor force. This birth cohort would turn 14 at the
time of the delayed (2034) hypothetical increase.

56 See 2023 Annual Report and Supplemental Single-Year Table IV.B1, https://www.ssa.gov/OACT/TR/2023/
lr4b1.html.
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Figure 7. Annual Combined Payroll Taxes by Earnings Level and Birth Cohort
Under Current Law and Delayed (2034) Payroll Tax Incease
In Nominal Dollars

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Source: CRS.
Notes: The solid lines represent scheduled combined payrol taxes for hypothetical workers under current law
and the 2023 intermediate assumptions. The dotted lines represent projected increase in combined payrol taxes
for hypothetical earners that is 4.15 percentage. Under this scenario, the combined payrol tax rate would be
16.55% on covered wages from 2034 through 2097. The x-axes are different for each birth cohort. However,
the years correspond to ages 21-66 for each respective cohort (i.e., years of expected participation in the labor
force). Additionally, the y-axes display different dol ar values. This reflects the growth in economy-wide earnings.
That is, given the projected growth in economy-wide earnings, a medium earner born in 2020 is expected to
earn roughly 10 times more than is a medium earner born in 1960 in nominal terms. (Hence the y-axes for the
2020 cohort exhibit a wider range of values than the y-axes for the 1960 cohort.) Therefore, younger workers
would pay more in total payrol taxes in nominal terms. However, as shown in Table 2, all cohorts of workers
are subject to the same scheduled payrol tax rate under current law.
As shown in Table 6, the effective benefit rates by birth cohort and earnings levels would remain
unchanged. The effective tax rates, however, would increase for some but not all birth cohorts. As
discussed, a delayed payroll tax rate increase, effective in 2034, would not affect the 1960 birth
cohort.57 Younger generations would bear at least some additional payroll tax burden but for
different portions of their work careers. For instance, as shown in Table 6, low earners in the
1980 birth cohort would experience a higher effective tax rate by about 1.40 percentage points (an
increase of 11.32%). Although this generation would experience some increase in its effective tax
rate under this scenario, it would be less than under an immediate payroll tax rate increase (see
Table 4). Likewise, the 2000 birth cohort would also experience an increase in its effective tax
rate by about 3.45 percentage points (an increase of over 27% for most workers) under a delayed
payroll tax rate increase. However, the effective tax rate for this birth cohort is also less than
under an immediate (2023) tax rate increase (Table 4). Thus, under a delayed payroll tax rate
increase scenario, some of the additional tax burden that would have been absorbed by the 1980
and 2000 birth cohorts under an immediate payroll tax rate increase would be shifted to the
(younger) 2020 birth cohort. As shown in Table 6, the 2020 birth cohort’s effective tax rate would
increase by 4.15 percentage point (an increase of 33.47%) under a delayed increase scenario
(higher than under the immediate scenario shown in Table 4).
As Figure 7 and Table 6 show respective increases in some birth cohorts’ payroll taxes and
effective tax rates, this would decrease those birth cohorts’ benefit-to-tax ratios. As expected,
because the 1960 birth cohort was largely unaffected by a delayed payroll tax rate increase, its
benefit-to-tax ratio remains unchanged as compared to scheduled amounts. The benefit-to-tax
ratio for the 1980 birth cohort, however, would decline relative to the ratio under current policy.
For instance, a medium earner born in 1980 could expect the benefit-to-tax ratio to decrease by
0.20 (a decrease of 10.17%) under a delayed payroll tax increase scenario. However, this is a
smaller decrease than would occur under an immediate payroll tax increase scenario (a ratio
decrease of 0.30 or a percentage decrease of about 15%, as shown in Table 4) despite the higher
tax rate increase under the delayed implementation scenario. This occurs because the delayed tax
rate increase would apply to a sufficiently smaller portion of the 1980 birth cohort’s remaining
years in paid work. Similarly, the benefit-to-tax ratios for the medium earners of the 2000 birth
cohort under a delayed increase scenario would be lower than under current policy but not as low
as it would be under an immediate increase scenario.
The effects of delaying a payroll tax increase (i.e., from 2023 to 2034) has the effect of shifting
the burden to the younger birth cohorts. In this analysis, that younger birth cohort is represented
by those born in 2020. As Table 6 shows, their benefit-to-tax ratios decrease under a delayed
scenario more than under an immediate tax increase scenario (Table 4). For example, Table 6

57 That is, that birth cohort would not bear any additional tax burden from a payroll tax rate increase, as it would
become effective after the cohort had exited paid labor.
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shows that under a delayed tax increase scenario, a medium earner in the 2020 cohort would see
his or her benefit-to-tax ratio decrease by 0.54 (a decrease of 25.08%), whereas under an
immediate tax increase scenario, the decrease in the benefit-to-tax ratio would have been 0.47 (a
decrease of 21.72%).
Table 6. Delayed (2034) Payroll Tax Increase: Change and Percentage Change in
Effective Benefit Rate, Effective Tax Rate, and Benefit-to-Tax Ratio for Hypothetical
Earners by Birth Cohort
Under the 2023 Intermediate Assumptions
Very Low
Medium
Maximum
Birth Cohort
Earner
Low Earner
Earner
High Earner
Earner
Change (in Percentage Points [pp]) and Percentage Change (%) in Effective Benefit Rate
1960
0.00 pp
0.00 pp
0.00 pp
0.00 pp
0.00 pp
0.00%
0.00%
0.00%
0.00%
0.00%
1980
0.00 pp
0.00 pp
0.00 pp
0.00 pp
0.00 pp
0.00%
0.00%
0.00%
0.00%
0.00%
2000
0.00 pp
0.00 pp
0.00 pp
0.00 pp
0.00 pp
0.00%
0.00%
0.00%
0.00%
0.00%
2020
0.00 pp
0.00 pp
0.00 pp
0.00 pp
0.00 pp
0.00%
0.00%
0.00%
0.00%
0.00%
Change (in Percentage Points [pp]) and Percentage Change (%) in Effective Tax Rate
1960
0.00 pp
0.00 pp
0.00 pp
0.00 pp
0.00 pp
0.00%
0.00%
0.00%
0.00%
0.00%
1980
1.40 pp
1.40 pp
1.40 pp
1.40 pp
1.38 pp
11.32%
11.32%
11.32%
11.32%
11.16%
2000
3.45 pp
3.45 pp
3.45 pp
3.45 pp
3.19 pp
27.85%
27.85%
27.85%
27.85%
25.71%
2020
4.15 pp
4.15 pp
4.15 pp
4.15 pp
4.15 pp
33.47%
33.47%
33.47%
33.47%
33.47%
Change and Percentage Change (%) in Benefit-to-Tax Ratio
1960
0.00
0.00
0.00
0.00
0.00
0.00%
0.00%
0.00%
0.00%
0.00%
1980
-0.38
-0.28
-0.21
-0.17
-0.12
-10.17%
-10.17%
-10.17%
-10.17%
-10.04%
2000
-0.84
-0.61
-0.45
-0.37
-0.26
-21.78%
-21.78%
-21.78%
-21.78%
-20.45%
2020
-1.01
-0.73
-0.54
-0.45
-0.33
-25.08%
-25.08%
-25.08%
-25.08%
-25.08%
Source: CRS calculations based on hypothetical earner profiles developed by OCACT. Calculations assume
scheduled benefits paid under intermediate assumptions and current law and a payrol tax rate increase of 4.15
percentage points from 2034 through 2097.
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link to page 37 Social Security: Estimated Impact of Hypothetical Solvency Measures

Notes: The effective benefit rate is calculated as total benefits received divided by total career covered earnings.
The effective tax rate is calculated as total taxes paid divided by total career covered earnings. Total benefits
received and total taxes paid are in 2022 dol ars. The benefit-to-tax ratio is calculated as total benefits received
divided by total taxes paid.
Benefit Reduction Effective in 2034 (Scenario 4)
The fourth hypothetical provision put forward in annual reports is a delayed benefit reduction
(i.e., benefit cut). The trustees estimate that, if effective in 2034, it would take a benefit reduction
of about 25% to ensure trust fund solvency throughout the 75-year projection period. This
scenario is commonly referred to as the “no-action” scenario. Whereas the previous three
hypothetical scenarios analyzed in this report would require congressional action, this one would
not require Congress to do anything. That is, at the projected date of trust fund depletion (2034)
and absent any changes to current law, total benefits payable will necessarily become equal to
continuing tax revenues.58 At the time of depletion, with no more trust fund assets to redeem or
interest income, tax revenues are projected to support a level of benefits lower than what is
scheduled under current law.
The estimated benefit reduction of 25% is the average benefit reduction over the remainder of the
75-year projection period (2034-2097) that would ensure trust fund solvency. The percent of
benefits that may be supported by ongoing program revenues—payable benefits—may change
from year to year. Said differently, the system could be balanced by raising and lowering the
benefit reduction each year. (This would essentially be a fluctuating benefit reduction in each year
based on the level of projected, continuing program revenues.) As shown in Figure 8, the
program is projected to have sufficient funds to pay 80% of benefits in 2034, and this percentage
would drop to 74% by 2097. Thus, the benefit reduction rate as projected by OCACT would
range between 20% and 26% between 2034 and 2097, with an average rate of benefits reduction
of approximately 25% over the time period. Under the trustees’ intermediate assumptions, the
maximum benefit reduction under current law would be about 29% in the years 2076-2079.

58 For more information, see CRS Report RL33514, Social Security: What Would Happen If the Trust Funds Ran Out?
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Social Security: Estimated Impact of Hypothetical Solvency Measures

Figure 8. Benefits as a Share of Scheduled Benefits, 2023-2097

Source: CRS, based on an OCACT memorandum from Daniel Nickerson, actuary, and Kyle Burkhalter,
actuary, to Chris Chaplain, supervisory actuary, and Karen Glenn, deputy chief actuary, “Current-Law OASDI
Payable Percentages: Current-Law Revenue as a Percent of the Cost of Providing Scheduled Benefits Through
Year 2097—Information,” April 18, 2023.
Notes: Projections are based on the trustees’ 2023 intermediate assumptions. In calculating the share of payable
benefits, OCACT limits revenue from the taxation of benefits to the amount that would be obtained from the
payable benefits.
Whereas an immediate benefit reduction would require a reduction in benefits of about 21.3%
(see “Immediate Benefit Reduction Effective in 2023 (Scenario 2)”), a delayed benefit reduction
would require an average reduction in benefits by about 25%. Similar to the tax increase
hypothetical scenarios, a delayed benefit reduction would essentially shift an additional portion of
the overall benefit decrease to younger birth cohorts relative to an immediate benefit reduction.
Figure 9 shows that the 1960 birth cohort would be spared some of the benefit reduction that
would become effective in 2034, because this group would start claiming benefits in 2027 and
thus would receive seven years of full scheduled benefits prior to projected trust fund depletion.
Workers in all other cohorts, however, would experience the benefit reduction in each year in
which they receive benefits. Thus, a delayed benefit cut would be shared less equally across birth
cohorts than would an immediate (2023) benefit cut as shown in Figure 6.
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