Social Security Reform: Benefit Formula Options




From its inception, the formulas
for determining benefits payable
under the Social Security System
have included elements of
individual equity and social
adequacy, so that benefits vary
in proportion to differences
in worker contributions, yet
benefits are sufficient to meet
the deemed financial needs
of most workers and covered
• According to the 2021 Social
Security Trustees Report,
accumulated assets will be
depleted by 2034 and income
to the system thereafter will be
insufficient to pay all scheduled
benefits when due.
• Some or all of this shortfall
can be averted by changing
the primary formula for retired
worker benefits, changing the
formulas for determining the
benefits of eligible spouses and
other dependents of workers,
and/or changing the formula for
computing annual cost-of-living
• This issue brief explores a
wide variety of proposals for
changing the formulas for
determining benefits that
have been made over the
years by members of Congress,
government-appointed panels
and commissions, and outside
experts, with an eye toward how
the proposed changes would
affect the balance between
individual equity and social

Author(s): American Academy of Actuaries Social Security Committee

Publication Date: August 2022

Publication Site: American Academy of Actuaries