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The Unfunded Liabilities of the Social Security System

March 24, 2016 Leave a comment

The Trustees of the Social Security System issue a report each year on the overall state of the system.  The 2015 report is available publicly (https://www.ssa.gov/oact/tr/2015/trTOC.html). Consider the following statement in the Overview section of this recently-released report.

The open group unfunded obligation for OASDI over the 75-year period is $10.7 trillion in present value….

In the above statement, OASDI stands for Old Age and Survivors Disability Insurance, the formal name for the Social Security program. The statement seems shocking because it suggests an enormous payment of benefits owed to individuals for which there is no funding source. This staggeringly large number is what is often reported in the media. But my guess is that most readers have no way of knowing how this number arises. With a bit of arithmetic, it is possible to show how it is obtained. Read more…

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