The Social Security Old Age Survivors Insurance (OASI) and Disability Insurance (DI) funds are being ‘drawn down.’
The OASDI combined Trust Fund is sustained each year by contributions and interest income, which are currently in surplus versus the annual cost of the program.
The interest income represents an internal governmental entry, since the government has ‘borrowed’ the funds in their entirety, $2.6 trillion, and is ‘booking’ interest obligations at an effective rate of 3.156% in 2016, on those borrowed funds.
The annual ‘contributions’ no longer cover the ‘cost’ of the program, so the earned interest is needed to cover the deficit, and that deficit is growing.
In other words, the ‘interest coupons’ are being redeemed, currently at a $51 billion / year average (2017-2021), and that will rise “steeply” into 2034.
And then… trouble ahead.
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Status of The Social Security and Medicare Programs
A SUMMARY OF THE 2017 ANNUAL REPORTS
Excerpts:
Social Security
The Social Security program provides workers and their families with retirement, disability, and survivors insurance benefits. Workers earn these benefits by paying into the system during their working years. Over the program’s 82-year history, it has collected roughly $19.9 trillion and paid out $17.1 trillion, leaving asset reserves of more than $2.8 trillion at the end of 2016 in its two trust funds.
The Trustees project that the [OASDI] combined fund asset reserves at the beginning of each year will exceed that year’s projected cost through 2029. However, the funds fail the test of long-range close actuarial balance.
The Trustees project that the combined trust funds will be depleted in 2034, the same year projected in last year’s report.
Social Security’s total income is projected to exceed its total cost through 2021, as it has since 1982. The 2016 surplus of total income relative to cost was $35 billion. However, when interest income is excluded, Social Security’s cost is projected to exceed its non-interest income throughout the projection period, as it has since 2010.
The Trustees project that this annual non-interest deficit will average about $51 billion between 2017 and 2020. It will then rise steeply as income growth slows to its sustainable trend rate as the economic recovery is complete while the number of beneficiaries continues to grow at a substantially faster rate than the number of covered workers.
After 2021, interest income and redemption of trust fund asset reserves from the General Fund of the Treasury will provide the resources needed to offset Social Security’s annual deficits until 2034, when the OASDI reserves will be depleted.
Thereafter, scheduled tax income is projected to be sufficient to pay about three-quarters of scheduled benefits through the end of the projection period in 2091. The ratio of reserves to one year’s projected cost (the combined trust fund ratio) peaked in 2008, declined through 2016, and is expected to decline steadily until the trust funds are depleted in 2034.
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