The Social Security Trustees have released their annual report. Not surprisingly, the financial condition and viability of the Social Security Trust continues to erode.  This will eventually force the U.S. Congress to make some very difficult decisions about whether to reduce benefits, and / or increase the “normal” retirement age for participants, and / or increase the Social Security payroll taxes to financially “right” the Social Security Trust.

Below you will find a press release from the Social Security Administration which highlights some of the key statistics in this year’s annual report. Important to note are the acceleration of several depletion dates (e.g. combined Trust Fund exhaustion in 2033, DI Trust Fund exhausted in 2016, etc.) and growing deficit rates under the status quo. We believe it is very important to consider how this may impact your retirement planning.

Monday, April 23, 2012

SSA Press Office

Social Security Board of Trustees: Projected Trust Fund Exhaustion Three Years Sooner Than Last Year

The Social Security Board of Trustees today released its annual report on the financial health of the

Social Security Trust Funds.  The combined assets of the Old-Age and Survivors Insurance, and

Disability Insurance (OASDI) Trust Funds will be exhausted in 2033, three years sooner than

projected last year.  The DI Trust Fund will be exhausted in 2016, two years earlier than last year’s

estimate.  The Trustees also project that OASDI program costs will exceed non-interest income in

2012 and will remain higher throughout the remainder of the 75-year period.

In the 2012 Annual Report to Congress, the Trustees announced:

• The projected point at which the combined Trust Funds will be exhausted comes in 2033 – three

years sooner than projected last year.  At that time, there will be sufficient non-interest income

coming in to pay about 75 percent of scheduled benefits.

• The projected actuarial deficit over the 75-year long-range period is 2.67 percent of taxable

payroll — 0.44 percentage point larger than in last year’s report.

• Over the 75-year period, the Trust Funds would require additional revenue equivalent to $8.6

trillion in present value dollars to pay all scheduled benefits.

“This year’s Trustees Report contains troubling, but not unexpected, projections about Social

Security’s finances.  It once again emphasizes that Congress needs to act to ensure the long-term

solvency of this important program, and needs to act within four years to avoid automatic cuts to

people receiving disability benefits,” said Michael J. Astrue, Commissioner of Social Security.

 Other highlights of the Trustees Report include:

 • Income including interest to the combined OASDI Trust Funds amounted to $805 billion in

2011.  ($564 billion in net contributions, $24 billion from taxation of benefits, $114 billion in

interest, and $103 billion in reimbursements from the General Fund of the Treasury—almost

exclusively resulting from the 2011 payroll tax legislation)

• Total expenditures from the combined OASDI Trust Funds amounted to $736 billion in 2011.

• Non-interest income fell below program costs in 2010 for the first time since 1983.  Program

costs are projected to exceed non-interest income throughout the remainder of the 75-year

period.

• The assets of the combined OASDI Trust Funds increased by $69 billion in 2011 to a total of

$2.7 trillion.

• During 2011, an estimated 158 million people had earnings covered by Social Security and paid

payroll taxes.

• Social Security paid benefits of $725 billion in calendar year 2011.  There were about 55 million

beneficiaries at the end of the calendar year.

• The cost of $6.4 billion to administer the program in 2011 was a very low 0.9 percent of total

expenditures.

• The combined Trust Fund assets earned interest at an effective annual rate of 4.4 percent in

2011.

 The Board of Trustees is comprised of six members.  Four serve by virtue of their positions with the

federal government: Timothy F. Geithner, Secretary of the Treasury and Managing Trustee;

Michael J. Astrue, Commissioner of Social Security; Kathleen Sebelius, Secretary of Health and

Human Services; and Hilda L. Solis, Secretary of Labor.  The two public trustees are Charles P.

Blahous, III and Robert D. Reischauer.

 The full report can be found at www.socialsecurity.gov/OACT/TR/2012/