There is concern about the long-term viability of Social Security. Changes are being considered. The Social Security system is projected to raise $1.062 trillion this year in income and to pay $1.163 trillion this year in benefits. Therefore, it will run a deficit this year, which it covers out of its $2.863 trillion trust fund at the beginning of this year. Benefit levels are expected to increase at a rate of 3.6% per year (2.3% inflation plus 1.3% annual increase in the number of beneficiaries) whereas income (FICA taxes) is expected to grow only 2.3% per year (inflation). Assume that the appropriate discount rate is 4.5%. Using a 75-year forecast time period, estimate the solvency of the Social Security system as of the beginning of this year. What is the value of its expected payments relative to its expected tax revenues plus the value of the trust fund? For this instance, the income and payments are made at the end of the year.

In order to bring it back to solvency, how much would they have to adjust aggregate benefits this year, (this will grow with inflation plus the growth rate in the number of beneficiaries assumed above)?

Please show all work and formulas used. Please also double-check that all formula answers are correct.