Study: Social Security in REALLY bad shape

New studies from Harvard and Dartmouth researchers find that the SSA's actuarial forecasts have been consistently overstating the financial health of the program's trust funds since 2000. 

"These biases are getting bigger and they are substantial," said Gary King, co-author of the studies and director of Harvard's Institute for Quantitative Social Science. "[Social Security] is going to be insolvent before everyone thinks." 

The Social Security and Medicare Trustees' 2014 report to Congress last year found trust fund reserves for both its combined retirement and disability programs will grow until 2019. Program costs are projected to exceed income in 2020 and the trust funds will be depleted by 2033 if Congress doesn't act. Once the trust funds are drained, annual revenues from payroll tax would be projected to cover only three-quarters of scheduled Social Security benefits through 2088. 

Researchers examined forecasts published in the annual trustees' reports from 1978, when the reports began to consistently disclose projected financial indicators, until 2013. Then, they compared the forecasts the agency made on such variables as mortality and labor force participation rates to the actual observed data. Forecasts from trustees reports from 1978 to 2000 were roughly unbiased, researchers found. In that time, the administration made overestimates and underestimates, but the forecast errors appeared to be random in their direction. 

"After 2000, forecast errors became increasingly biased, and in the same direction. Trustees Reports after 2000 all overestimated the assets in the program and overestimated solvency of the Trust Funds," wrote the researchers, who include Dartmouth professor Samir Soneji and Harvard doctoral candidate Konstantin Kashin. 

King and the studies' co-authors confidentially interviewed former and current Social Security Administration actuaries involved in the forecasting process as part of their research to figure out why the forecast bias happened since 2000. He noted that actuaries are in the center of a political firestorm over the future of Social Security as lawmakers debate whether to cut benefits, raise taxes or a combination of both. "Actuaries worked really hard at being unbaised," he said. "We find no evidence that they bend to political pressure." 

But the agency's attempts to be unbiased have created a bunker mentality, he said, which lead them to ignore evidence that Americans life expectancy has risen more than they have projected and how that could hurt the future funding of Social Security system.

DYI Comments:  Two political firestorms that will arrive in the 2020's is student loans and Social Security/Medicare.  The Millennials seeking a political/economic relief from their massive indebtedness and the broke Boomer's desperate to maintain some standard of living from Social Security.  It appears that the smaller generation who will be at their peak earnings will shoulder the brunt of the tax load. That group of course is Generation X.  Bottom line they are going to get sucked dry!

DYI