A couple of researchers at Harvard have taken a look at the way the Social Security folks compute estimates of longevity, and the SS people get a D+.
We reached these conclusions, and presented them in an article in the journal Demography, after finding that the government’s methods for forecasting Americans’ longevity were outdated and omitted crucial health and demographic factors. Historic declines in smoking and improvements in the prevention and treatment of cardiovascular disease are adding years of life that the government hasn’t accounted for. (While obesity has rapidly increased, it is not likely, at this point, to offset these public health and medical successes.) More retirees will receive benefits for longer than predicted,
Okay, so what does this mean. It means the surplus that is being built up in the Social Security Trust Fund will be depleted earlier than expected.
Those facts are widely known. What’s not is that the Social Security Administration underestimates how long Americans will live and how much the trust funds will need to pay out — to the tune of $800 billion by 2031, more than the current annual defense budget — and that the trust funds will run out, if nothing is done, two years earlier than the government has predicted.
Now contrary to the scare tactics of politicians, this does not mean everyone’s SS will stop, or that the program is bankrupt. It does mean that the SS fund will only be able to fund benefits out of what comes in each year, which would means benefits of about 70-85% of what is legally owed. Not good, but not the catastrophe one would expect from listening to ignorant legislators.
So what to do? Either cut benefits, raise SS taxes or fund the deficit out of general revenues. Really, it has to be one of those three or a combination thereof, unless of course obesity, cancer, heart disease, psoriasis or the proliferation of assault weapons makes a major change in life expectancy. So we will all wait and see how the SS movie turns out. Stay tuned.