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Stochastic Projections |
What is a stochastic model? | A stochastic model is a tool for estimating probability distributions of potential outcomes by allowing for random variation in one or more inputs over time. The random variation is usually based on fluctuations observed in historical data for a selected period using standard time-series techniques. Distributions of potential outcomes are derived from a large number of simulations (stochastic projections) which reflect the random variation in the input(s). |
SSA's stochastic model |
In August of 2002, the Social Security Administration's
Office of the Chief Actuary
began development of a stochastic model to to project a probability
distribution for future outcomes of the financial status of the Social
Security Trust Funds. The first version of this model (Version 2002.1) was
completed in February 2003. It was based on the intermediate assumptions and
the methods of the 2002 Trustees Report.
Appendix E of the most recent Trustees Report presents an overview of the most recent methodology and results of our stochastic model. In addition, Actuarial Study #117 provides a more extensive description based on the 2004 version of the model and its results. |
Related Links | Internet sites detailing information about other stochastic models that project the financial status of the Social Security Trust Funds are also available. In addition, a paper prepared by SSA's Office of Policy compares results from various stochastic models. |
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