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Retirement Planning > Social Security

Tough Talk From Social Security's Chief Actuary on Retirement

By James J. Green

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Testifying before the Senate Finance Committee on Thursday, July 15, Stephen Goss, chief actuary of the Social Security Administration, said that encouraging Americans to “work longer and be more productive can potentially contribute to meeting the financial challenges that lie ahead” as Americans live longer in general, as the population experiences the result of “the permanent declines in the birth rate since 1965,” and as the baby boomers move from “working age to retirement age.”

The demographic impact of these changes is most clear from the Social Security program itself, Goss suggested: “We have had about 3.3 contributing workers for each beneficiary from 1975 to 2008. By 2035, we project that we will have only about 2 contributing workers for each beneficiary.” Goss said that more than SSA will be affected by these changes, arguing that “a large and permanent change in the age distribution of our population that will challenge all aspects of our economy.”

As for the specific topic of the hearing before the Committee led by Senators Max Baucus (D-Montana) and Charles Grassley (R-Iowa)–”Choosing to Work During Retirement and the Impact on Social Security“–Goss said the SSA’s 2009 Trustees Reports projects that “the productivity of our workforce will continue at the historic rate of the past 40 years on the assumption that improvements in technology will offset the expected slowdown in the rate of increase in educational attainment. The reports also assume that workers will tend to work longer as life expectancy and health improve. Offsetting this assumption is the expectation that disability prevalence will continue to climb somewhat in the future. Overall, the Trustees project that labor force participation will not change substantially from recent levels under current policy.”

Goss then laid out three hypothetical scenarios “for increased labor force participation in the future beyond what the Trustees project under current law and policy.”

? Increase Work at Age 62 and Older by 10%. Under this scenario, Goss said, an additional 10% rise in labor force participation at ages 62 and older that begins by 2011 would add about 1.3% to the taxable earnings for the Social Security program.

? Increase Labor Force Participation to the 1950 Male Rates, Unadjusted. Under this scenario, labor force participation at ages 45 and older would rise by 2011 for both men and women to the rates experienced in 1950 by men alone, resulting in “a dramatic increase in overall employment above current and projected levels,” resulting in an increase in Social Security taxable earnings of about 16.5% over projected levels.

? Increase Labor Force Participation to the 1950 Male Rates, Adjusted. Under this scenario, Goss said, labor force participation at ages 45 and older would rise by 2011 for both men and women to the rates experienced in 1950 by men alone. However, the assumed increases in labor force participation here reflect the availability of disability benefits under the Social Security program, which started in 1957, and the increasing average age of the group age 65 and older. For individuals projected to be receiving disabled worker benefits in the future at ages 45 to 66, the assumed increase in labor force participation is assumed to be half as large as the general increase implied by a return to 1950 male rates. In addition, labor force participation over age 65 is here assumed to be at 1950 rates on an age-specific basis so that rates for the entire age group 65 and older would tend to decline somewhat as the average age for the group increases. This scenario, Goss said, would imply an increase in Social Security taxable earnings of about 13.5% over projected levels.

Read Goss’s complete prepared testimony from July 15.

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