Social Security provides monthly cash benefits to retired or disabled workers, their family members, and family members of deceased workers. Many people of all ages have some connection to the program, including an estimated 178 million covered workers and approximately 64.5 million beneficiaries in 2020.
The program’s income and outgo are accounted for with the Social Security trust funds. They represent funds dedicated to pay current and future Social Security benefits. In 2019, the program had total income of $1,062 billion (92.4% from dedicated tax revenues), total expenditures of $1,059 billion (98.9% for benefit payments), and trust fund reserves of $2.9 trillion (U.S. Treasury securities) available for future program spending. Under the 2020 intermediate assumptions, the Social Security Board of Trustees project, with these asset reserves, the trust funds to remain “solvent” until 2035 (the 2020 intermediate assumptions reflect the trustees’ understanding of Social Security at the start of 2020; it does not include potential effects of the Coronavirus Disease 2019, or COVID-19). That is, until that time, the trust funds are projected to be able to pay full benefits scheduled under current law on a timely basis. In 2035, however, the trust fund reserves are projected to be depleted. While the program would continue to operate with scheduled tax revenues, those revenues are projected to cover about 79% of scheduled benefits through the end of the projection period (2094). It is unclear how the U.S. Treasury would handle the payment of scheduled benefits under such a scenario.
Social Security’s projected long-range funding shortfall is driven largely by demographic factors. Declines in fertility and increases in longevity result in a lower ratio of workers to beneficiaries (projections show the ratio of workers paying into the system to support each beneficiary is estimated to fall from 2.8 in 2018 to 2.3 in 2035). Changes to Social Security have long been an issue of interest to Congress from a trust fund solvency perspective. Policy proposals to address Social Security’s projected funding shortfall typically include a combination of revenue increases and benefit adjustments. Although the process of selecting specific program changes would likely involve intense debate in Congress, policymakers generally agree that taking legislative action sooner rather than later could mitigate the effects on workers and beneficiaries and allow people as much time as possible to adjust to the changes.
“Social Security’s Funding Shortfall,” CRS Insight IF10522, May 5, 2020 (5-page PDF)