Five Facts on the threat to Social Security
As French President Emmanuel Macron pushes forward with controversial legislation to raise the retirement age in France to safeguard the country’s pension system, Social Security faces its own long-term problems here in the U.S. Despite the politically contentious nature of Social Security reform, a bipartisan group of senators are trying to get the ball rolling on Capitol Hill on a plan to save it from insolvency. Here are Five Facts about the health of Social Security and what can be done to ensure this critical social safety program is there for future generations.
1. Roughly 40% of elderly Americans rely on Social Security as their primary source of income.
The latest data from the Social Security Administration shows that for 37% of men and 42% of women in retirement, Social Security checks account for at least 50% of their incomes. And for roughly 12% of elderly men and 15% of elderly women, Social Security accounts for more than 90% of their income. With roughly 67 million Americans receiving Social Security checks in 2023, that leaves approximately 9 million elderly Americans who would lose a large share of their primary source of income if benefits had to be reduced.
2. Social Security taxes have been outpaced by payouts since 2010.
Social Security is funded primarily through payroll taxes paid by workers and their employers, with a small portion coming from taxes on Social Security benefits. Since 2010, payments have exceeded revenues as more eligible Americans leave the workforce and enter retirement, cutting into the trust funds that serve as Social Security’s cash reserves. In 2021 alone, the program ran a deficit of $56.3 billion as it served about 65 million beneficiaries.
3. The ratio of workers per retiree is at its lowest point in history.
One way to understand Social Security’s woes is to look at the ratio of workers paying the payroll taxes that fund Social Security versus retirees who receive their benefits. In 1950, there were roughly 16.5 workers effectively paying for every retiree’s Social Security benefit, while in 2010, there were only 2.9 workers. A 2014 study estimated that ratio would fall to 1.9 workers for every retiree by 2100. Longer retirements and a shrinking birthrate are two of the factors contributing to this trend.
4. Social Security’s trust funds are projected to be technically insolvent by 2032.
The increasing costs and decreasing revenues paint a grim picture for Social Security, with the nonpartisan Congressional Budget Office predicting in February that the programs’ trust funds will be depleted within a decade. Once that happens, benefits could be cut by as much as 20% unless Congress acts to shore up the program. Only a year ago, Social Security pinned the insolvency date at 2034 – meaning that the window to keep full benefits flowing is shrinking faster and faster.
5. A majority of Americans want to preserve Social Security for future generations.
Unsurprisingly, Americans greatly cherish Social Security, with a 2020 AARP poll showing 96% of American adults support the program – however, that same poll showed that 57% of Americans weren’t confident in the future of the program.