Experts: Social Security underestimates costs due to longer lives
Monday, December 6th 1999, 12:00 am
News On 6
WASHINGTON (AP) -- Social Security costs in the next century are being underestimated because people are living longer, a bipartisan group of experts said Monday. As a result, there may be a bigger cash shortfall than anticipated.
"It's because good things are happening to us," said Eugene Steuerle, an economist from The Urban Institute, who chaired the panel. "While the (Social Security) trust fund might be in worse actuarial balance, that's largely because people are living longer."
The panel, which also included demographers and other experts from business and academia, was convened by the Social Security Advisory Board, created by Congress in 1994 to make recommendations to the board of trustees of the nation's retirement program.
In a report released Monday, the panel said that based on the most recent research Social Security's trustees should assume faster increases in life expectancy when they make their next report about the program's financial outlook, due in the spring of 2000.
Specifically, the panel said the trustees' current assumption that life expectancy for Americans will reach 81.5 years in 2070 should be boosted to 85.2.
Ultimately, that would mean 3.7 more years of collecting Social Security benefits per person, on average.
Social Security's trustees are not obligated to take the private panel's advice. However, Social Security Commissioner Kenneth S. Apfel, who is among the trustees said, "it will be carefully considered."
In 1999, Social Security's trustees projected that the program will run short of cash starting in 2034 and that an immediatepayroll tax increase of 2.07 percent -- or corresponding savings -- would be needed to ensure balanced books through 2074.
The private panel's report said that wages also may grow faster than the trustees have assumed. But that increase in cash may be canceled out by lower returns on Treasury bonds, which the Social Security Administration invests uses for investing its cash reserves.
Looking at changes to Social Security that lawmakers have suggested in order to avoid the need for future tax increases or benefit cuts, panel members said they felt comfortable assuming only a 3 percent greater yield if Social Security money were to be invested in the stock market by either the government or individuals. The Social Security Administration in the past has assumed a 4 percent difference between private investment and the government bonds currently used.