Social Security’s Financial Outlook: The 2022 Update in Perspective

The 2022 Trustees Report contains no real news about the overall future of the Social Security program. The Trustees did not change any of the ultimate economic or demographic assumptions, and the 75-year deficit declined only very slightly – 3.42 percent of taxable payrolls in 2022 compared to 3.54 percent in 2021. The year for depletion of trust fund assets increased by one year – from 2034 to 2035. Note these calculations were done in February 2022, and the future path of the economy looks more uncertain than it did earlier in the year. One factor contributing to the stability in the longrun picture is the more sanguine assessment of the Disability Insurance component of the program. To reflect the continued decline in caseloads, the Trustees reduced the assumed long-range disability incidence rate. At this point, the Disability Insurance trust fund, which pays disability benefits, is no longer projected to be depleted within the 75-year projection period. This brief updates the numbers for 2022 and puts the current Report in perspective. It also briefly discusses developments on the disability front and strongly rebuts the repeated contention that retirees are particularly hurt by inflation because they "live on fixed incomes." The bottom line, however, is that the program continues to run a 75-year deficit of roughly 3.5 percent of taxable payrolls, and the trust fund will be depleted by 2035, after which the program can pay only about three quarters of benefits. None of this is new; Social Security’s shortfall over the next 75 years has been evident for the last three decades. It should be addressed sooner rather than later in order to share the burden more equitably across cohorts, restore confidence in the nation’s major retirement program, and give people time to adjust to needed changes.