CBO’s 2023 Long-Term Projections for Social Security

In this report, the Congressional Budget Office describes its long-term projections for Social Security. One set of projections reflects a scenario in which the program continues to pay benefits as scheduled under current law, regardless of whether the program’s two trust funds have sufficient balances to cover those payments. Another set of projections reflects a scenario in which Social Security outlays are limited to what is payable from annual revenues after the combined trust funds are exhausted, which, in CBO’s current projections, occurs in fiscal year 2033.

• Social Security’s Finances, With Scheduled Benefits. CBO projects that if Social Security paid benefits as scheduled, spending on the program would increase from 5.2 percent of gross domestic product (GDP) in 2023 to 7.0 percent in 2097; that increase is attributable to the increase in the average age of the population. Revenues would remain around 4.6 percent of GDP over the same period. After 2097, however, the gap between revenues and outlays would widen, and shortfalls would continue to increase.
  
  In CBO’s projections, the Old-Age and Survivors Insurance Trust Fund is exhausted in fiscal year 2032, and the Disability Insurance Trust Fund is exhausted in calendar year 2052. Social Security’s actuarial deficit over the next 75 years is equal to 1.7 percent of GDP, or 5.1 percent of taxable payroll.
• Distribution of Scheduled Benefits and Payroll Taxes. In CBO’s projections, average real (inflation-adjusted) initial retirement and disability benefits increase over time. Initial retirement benefits replace slightly larger shares of past earnings for later cohorts than earlier cohorts. Payroll taxes paid over the lifetime, measured as a percentage of lifetime earnings, do not change much for successive cohorts. Within cohorts, people with higher earnings generally receive larger benefits than people with lower earnings, but those larger benefits replace a smaller share of preretirement earnings. People with higher earnings pay a smaller share of lifetime earnings as payroll taxes.
• Social Security’s Finances, With Payable Benefits. CBO projects that if Social Security outlays were limited to what is payable from annual revenues after the combined trust funds’ exhaustion in fiscal year 2033, Social Security benefits would be 25 percent smaller than scheduled benefits in 2034. They would be 30 percent smaller in 2097 and later years.
• Distribution of Payable Benefits. After the combined trust funds’ exhaustion in the payable-benefits scenario, average retirement benefits in the first year of claiming resume their growth, but those benefits are smaller than scheduled benefits for people born after 1968 (that is, those who turn 65 after 2033).