Social Security Projections

SOCIAL SECURITY PROJECTIONS….When the Social Security trustees project the future, they actually make three projections: pessimistic, optimistic, and intermediate. The intermediate one gets all the press, but which one has historically turned out to be most accurate? Roger Lowenstein tells us today in the New York Times Magazine:

David Langer, an independent actuary who made a study of Social Security’s previous projections compared with the actual results in 2003, thinks the ”optimistic” case is its most accurate. Over a recent 10-year span, the trustees’ intermediate guesses turned out to be quite pessimistic. Its optimistic guesses were dead on, and its pessimistic case ? sort of a doomsday situation ? was wildly inaccurate.

In the “optimistic” case, of course, Social Security is solvent forever even with no changes ? as the chart on the right shows. (Note: the chart illustrates the projected health of the trust fund under all three scenarios. When the blue lines hit zero, the trust fund is exhausted. Click the chart to read the underlying details.)

More generally, Lowenstein’s piece is excellent reading. It includes lucid explanations of most of Social Security’s most critical issues, some very good historical information about the program, and a nice discussion of actuarial issues (which I plan to revisit tonight). It’s an outstanding primer and well worth reading.