by Alicia H. Munnell, Center for Retirement Research at Boston College
IB#20-7
The brief’s key findings are:
- The 2020 Trustees Report, which was prepared before the pandemic, shows:
- Social Security’s 75-year deficit increased from 2.78 percent to 3.21 percent of payroll.
- Trust fund depletion remains at 2035, after which payroll taxes still cover about three quarters of promised benefits.
- This shortfall is manageable, and the pandemic is unlikely to fundamentally alter the long-term financial status of the program.
- Today’s crisis has also underscored the importance of Social Security, which continues to provide a steady source of income to millions of Americans.
- Therefore, once the crisis subsides, stabilizing Social Security’s long-term finances should be a high priority to ensure that Americans have full confidence in its future
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1 comment:
"The dollar “bend points” in the benefit formula
are also adjusted by the AWI (but up to age 62 rather than age 60). For the 1960 birth cohort, the bend point values used to calculate their benefits will reflect the growth of the AWI between 2018 and 2020."
This is a good trick in that the SSA will not have the wage data yet.
Those born in 1960 can take early retirement as of 1/1/2022. The data for year 2020 will not be available yet to determine the wage growth. That is the reason for the two year lag.
Of course the bend points identify 2020, but it actually data from 2018. You can verify this by looking at the rate of change over years between AWI and the bend points.
A 15% drop in the AWI will produce nearly and identical 15% decrease in cohort benefits.
Bend Points are smaller values rounded to whole dollars. Therefore they are less accurate. While the AWI are larger values rounded to whole dollars.
AWI Year AWI change Bend Point Year bend point
1986 2.97% 1988 2.90%
1987 6.38% 1989 6.27%
1988 4.93% 1990 5.01%
1989 3.96% 1991 3.93%
1990 4.62% 1992 4.59%
1991 3.73% 1993 3.62%
1992 5.15% 1994 5.24%
1993 0.86% 1995 0.95%
1994 2.68% 1996 2.58%
1995 4.01% 1997 4.12%
1996 4.89% 1998 4.84%
1997 5.84% 1999 5.87%
1998 5.23% 2000 5.15%
1999 5.57% 2001 5.65%
2000 5.53% 2002 5.53%
2001 2.39% 2003 2.36%
2002 1.00% 2004 0.99%
2003 2.44% 2005 2.45%
2004 4.65% 2006 4.63%
2005 3.66% 2007 3.66%
2006 4.60% 2008 4.56%
2007 4.54% 2009 4.64%
2008 2.30% 2010 2.28%
2009 -1.51% 2011 -1.58%
2010 2.36% 2012 2.40%
2011 3.13% 2013 3.13%
2012 3.12% 2014 3.16%
2013 1.28% 2015 1.23%
2014 3.55% 2016 3.63%
2015 3.48% 2017 3.39%
2016 1.13% 2018 1.13%
2017 3.45% 2019 3.46%
2018 3.62% 2020 3.67%
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