The trust funds that help pay Social Security benefits to some 67 million Americans are projected to run dry in 2035, the Social Security Administration (SSA) outlined in its annual report to Congress on Monday.
If Congress fails to act before then, the system will have to rely entirely on payroll taxes and other income to make payments to retirees and other beneficiaries. Without a fix to address the funding shortfall, the SSA would be able to pay only about 83% of scheduled benefits, the report projects.
The only glimmer of good news: Last year’s report projected that the trust funds would run out in 2034. The new report credits a strong economy and wage growth for the one-year reprieve.
How much is in the Social Security trust funds?
There are two trust funds that help fund benefits. The Old-Age and Survivors Insurance Trust Fund (OASI) was established in 1940 and the separate Disability Insurance Trust Fund (DI) was added in 1957. The reserves of the combined trust funds total $2.788 trillion and declined by $41 billion in 2023.
How much were Social Security expenditures in 2023?
A total of $1.379 trillion in benefits was paid out by Social Security in 2023. Administrative costs and other expenses brought total expenditures to $1.392 trillion.
How much income did Social Security receive in 2023?
The program logged $1.351 trillion in income during the 2023 calendar year. That broke down as follows:
-
$1.233 trillion in net payroll taxes (from about 183 million taxpayers).
-
$51 billion from the taxation of benefits.
-
$67 billion in interest on asset reserves (an effective annual rate of 2.4%).
The $41 billion shortfall in 2023 isn’t new. The program’s cost has exceeded non-interest income since 2010 and has surpassed total income (including interest on reserves) since 2021. As things stand, the total cost of the program is expected to exceed total income throughout the report’s 75-year projection.
With the nation’s declining birth rates and a growing cohort of retirees, the mismatch between the program’s income and expenditures is projected to worsen. In 2023, there were 36 Social Security beneficiaries for every 100 covered workers. By 2035, there will be a projected 42 beneficiaries for every 100 workers; that number is projected to peak at 49 in 2085.
What can be done to fix Social Security?
Congress has a limited number of options to extend the life of the trust funds and put Social Security on a more sustainable path, but all are politically risky, especially in a presidential election year.
These include raising the payroll deduction on current workers or raising the retirement age. Congress has taken steps to address expected shortfalls in the past, most notably in 1983, when it increased the full retirement age from 65 to 67, phased in over 33 years, according to the Bipartisan Policy Center, a nonprofit that works with lawmakers.
“Whether Congress chooses to eliminate the shortfall by increasing revenue, reducing benefits, or some combination, is a matter of political preference, not affordability,” Social Security Commissioner Martin O’Malley said in a statement. “Congress currently has several bills that address the shortfall without benefit cuts — it should debate and vote on these and any other proposals.”
