Is the assumption of the Social Security Trustee too optimistic?
this 2025 Social Security Trustee Report It confirms what has been obvious in nearly three decades – that is, the 75-year financing gap faced by social security is currently equal to 1.3% of GDP. And if nothing is taken before 2033, depletion of reserves in retirement trust funds will result in an automatic cut of benefits by 23%. And, as widely noted, the indicators are a little worse than last year’s report. The estimated 75-year deficit rose to 3.82% of taxable wages, compared with 3.50% in 2024.
However, all these estimates are based on the intermediate assumptions of the trustee. Previous blogs show Maternity hypothesis Probably lower than the intermediate prediction, and it is unlikely that we can use More immigrants Current policies should continue. The remaining question is whether our lifetimes last longer than the trustees assumed.
The mortality assumption will be important because the longer the lifespan of the current full retirement age for Social Security, the more expensive the plan will be. However, mortality is different from previous fertility and immigration assumptions along both dimensions.
First, while the expected birth count is an easy-to-understand indicator of fertility and net inflow into the country’s immigration, the indicator of mortality is even more puzzling. Mortality rates usually decline, assuming the rate at which the expected mortality rate decline is expected. If the rate of decline is faster than the intermediate assumption, people will live longer. If slowed down, people would die as early as possible. The trustee estimates that a higher rate of decline could increase the 75-year deficit from 3.82 to 4.61% taxable wages. A slower increase in mortality will reduce the 75-year deficit to 3.10 (see Table 1). The possible range of outcomes for mortality is greater than that for childbirth or immigration.
The second dimension of the discussion on mortality differs from fertility and immigration is the desirability of low-cost outcomes. It might be delighted if women decide to have more babies, or if the United States attracts more talented immigrants, but it is difficult to argue for those who died earlier. That said, it is still useful to speculate whether future mortality rates will undermine high or low costs. There are two evidences that actual results may lead to higher mortality rates than those suggested by the Trustee Intermediate Hypothesis.
First, comparisons show that the social security mortality hypothesis is slightly lower than other government entities. this Death rate assumptions in the Congressional Budget Office This leads to the life expectancy of 82.3 years of birth in 2055 – the end of the CBO projection period. exist Census 2023 Forecastthe assumed mortality rate leads to a life expectancy of 83.7 years born in 2055. In contrast, the assumptions of the trustee hypothesis result in a life expectancy of 82.0 years in 2055.
Second, comparisons with other developed countries also suggest a space for a significant improvement in life expectancy in the United States (see Figure 1). Life expectancy at birth in the United States and other high-income countries has increased dramatically over the past 40 years. However, progress in the United States is slower than peers, and the U.S. ranking has dropped from the middle of the group to the absolute bottom. Historically, two contributors to this underperforming performance were deaths related to smoking and obesity. Smoking gradually disappears, but obesity is still important. With the widespread availability of new weight loss drugs, the United States may regain its status as other developed countries. In short, future life expectancy forecasts may ruin the climax – increasing the cost of social security programs.
The assumptions that discuss the basis of the 2025 report are not criticism, but efforts to emphasize uncertainty about any forecasts over the next 75 years and to identify possible high-cost alternatives that are more likely than intermediate estimates. These developments – coupled with the program’s annual deficit increase, as the assessment period moves forward, these developments mean that trustees in the coming years may show a larger 75-year deficit in the coming years. However, even if the deficit is expected to be high, leverage can be available in terms of revenue and interests to restore balance. Congress just needs to take action.
