The Social Security debate in the United States encompasses benefits, funding, and other issues. Social Security is a social insurance program officially called "Old-age, Survivors, and Disability Insurance" (OASDI), in reference to its three components. It is primarily funded through a dedicated payroll tax. During 2015, total benefits of $897 billion were paid out versus $920 billion in income, a $23 billion annual surplus. Excluding interest of $93 billion, the program had a cash deficit of $70 billion. Social Security represents approximately 40% of the income of the elderly, with 53% of married couples and 74% of unmarried persons receiving 50% or more of their income from the program.Social Security Administration-Basic Facts-Retrieved August 20, 2016 An estimated 169 million people paid into the program and 60 million received benefits in 2015, roughly 2.82 workers per beneficiary. Reform proposals continue to circulate with some urgency, due to a long-term funding challenge faced by the program as the ratio of workers to beneficiaries falls, driven by the aging of the baby-boom generation, expected continuing low birth rate, and increasing life expectancy. Program payouts began exceeding cash program revenues (i.e., revenue excluding interest) in 2011; this shortfall is expected to continue indefinitely under current law.
In 2009, Social Security had collected approximately $2.8 trillion more in payroll taxes and interest than have been paid out since tax collection began in 1937. This surplus, which has since been partly spent down, is referred to as the Social Security Trust Fund. The fund contains non-marketable Treasury securities backed "by the full faith and credit of the U.S. government". The funds borrowed from the program are part of the total national debt of $18.9 trillion as of December 2015. Due to interest, the Trust Fund will continue increasing through the end of 2020, reaching a peak of approximately $2.9 trillion. Social Security has the legal authority to draw amounts from other government revenue sources besides the payroll tax, to fully fund the program, while the Trust Fund exists; however, payouts greater than payroll tax revenue and interest income over time will liquidate the Trust Fund by 2035, meaning that only the ongoing payroll tax collections thereafter will be available to fund the program. As of early 2026, this estimate was updated to late 2032.
There are certain key implications to understand under current law, if no reforms are implemented:
Estimates in 2025 showed that payroll taxes will only cover about 77% of the scheduled payout amounts from 2033 and beyond (this figure was later updated to late 2032). Without changes to the law, Social Security would have no legal authority to draw other government funds to cover the shortfall. Between 2021 and 2035, redemption of the Trust Fund balance to pay retirees will draw approximately $3 trillion in government funds from sources other than payroll taxes. This is a funding challenge for the government overall, not just Social Security; however, as the Trust Fund is reduced, so is that component of the national debt, and the Trust Fund amount is in effect replaced by public debt outside the program. The present value of unfunded obligations under Social Security was approximately $11.4 trillion over a 75-year forecast period (2016–2090). In other words, that amount would have to be set aside in 2016 so that the principal and interest would cover the shortfall for 75 years. The estimated annual shortfall averages 2.49% of the payroll tax base or 0.9% of gross domestic product (a measure of the size of the economy). Measured over the infinite horizon, these figures are 4.0% and 1.4%, respectively. The annual cost of Social Security benefits represented 4.0% of GDP in 2000 and 5.0% GDP in 2015. This is projected to increase gradually to 6.4% of GDP in 2035 and then decline to about 6.1% of GDP by 2055 and remain at about that level through 2086.
President Barack Obama opposed privatization (i.e., diverting payroll taxes or equivalent savings to private accounts) or raising the retirement age, but supported raising the annual maximum amount of compensation that is subject to the Social Security payroll tax ($137,700 in 2020) to help fund the program. In addition, on February 18, 2010, President Obama issued an executive order mandating the creation of the bipartisan National Commission on Fiscal Responsibility and Reform,Exec. Order No. 13,531, 75 Fed. Reg. 7,927 (Feb. 23, 2010). which made ten specific recommendations to ensure the sustainability of Social Security.The Moment of Truth: Report of the National Commission on Fiscal Responsibility and Reform, National Commission on Fiscal Responsibility and Reform 48–53 (Dec. 2010), available at http://www.fiscalcommission.gov/news/moment-truth-report-national-commission-fiscal-responsibility-and-reform
Federal Reserve Chairman Ben Bernanke said on October 4, 2006: "Reform of our unsustainable entitlement programs should be a priority ... the imperative to undertake reform earlier rather than later is great." The tax increases or benefit cuts required to maintain the system as it exists under current law are significantly higher the longer such changes are delayed. For example, raising the payroll tax rate to 15% during 2016 (from the current 12.4%) or cutting benefits by 19%, or eliminating the annual maximum amount of compensation that is subject to the Social Security payroll tax, would address the program's budgetary concerns indefinitely; these amounts increase to 16% and 21% respectively if no changes are made until 2034. During 2015, the Congressional Budget Office reported on the financial effects of various reform options.
Background on funding challenges
Overview
Social Security is funded through the Federal Insurance Contributions Act tax (FICA), a payroll tax. Employers and employees are each responsible for making tax payments of 6.2% of wages in 2018 (12.4% total) as FICA contributions, typically withdrawn from paychecks. Non-employee contractors are responsible for the entire 12.4%. During 2018, Social Security taxes were levied on the first $128,400 of income for employment; amounts earned above that are not taxed. Covered workers are eligible for retirement and disability benefits. If a covered worker dies, his or her spouse and children may receive survivors' benefits. Social Security accounts are not the property of their beneficiary and are used solely to determine benefit levels. Social Security funds are not invested on behalf of beneficiaries. Instead, current tax receipts are used to pay current benefits (the system known as "pay-as-you-go"), as is typical of some insurance and defined-benefit plans.
In each year since 1983, tax receipts and interest income have exceeded benefit payments and other expenditures, in 2009 by more than $120 billion. However, without further legislation, or change in benefits, this annual surplus will change to a deficit around 2021, when payments begin to exceed receipts and interest thereafter. The fiscal pressures are due to demographic trends, where the number of workers paying into the program continues declining relative to those receiving benefits.
Demographics
The number of workers paying into the program was 5.1 per retiree in 1960; this declined to 3.3 in 2007 and is projected to decline to 2.1 by 2035. Furthermore, life expectancy continues to increase, meaning retirees collect benefits longer. Federal Reserve Chairman Bernanke has indicated that the aging of the population is a long-term trend, rather than a proverbial "pig moving through the python".
The number of program recipients was 60.9 million in 2016, up approximately 0.9 million from 2015. The number receiving retirement benefits rose by 1.2 million, while the number receiving survivors and disability benefits fell by a total of approximately 0.3 million.
Social Security Trust Fund
Social Security payroll taxes and interest received are added to the Fund, while expenses (payments to recipients) are deducted from the Fund. For example, during 2016, the initial balance as of January 1 was $2,780 billion. An additional $710 billion in payroll tax revenue and $87 billion in interest added to the Fund during 2016, while expenses of $776 billion were removed from the Fund, for a December 31, 2016 balance of $2,801 billion (i.e., $2,780 + $710 + $87 − $776 = $2,801).
The accumulated surpluses are invested in special non-marketable Treasury securities (treasuries) issued by the U.S. government, which are deposited in the Social Security Trust Fund. At the end of 2009, the Trust Fund stood at $2.5 trillion. The $2.5 trillion amount owed by the federal government to the Social Security Trust Fund is also a component of the U.S. National Debt, which stood at $15.7 trillion as of May 2012. By 2017, the government had borrowed nearly $2.8 trillion against the Social Security Trust Fund.
Projections were made by the Board of Trustees of the Federal Old-Age and Survivors Insurance and Federal Disability Insurance Trust Funds (OASDI) in their 71st annual report dated May 13, 2011. Expenses exceeded tax receipts in 2010. The Trust Fund is projected to continue to grow for several years thereafter because of interest income from loans made to the US Treasury.
However, the funds from loans made have been spent along with other revenues in the general funds in satisfying annual budgets. At some point, however, absent any change in the law, the Social Security Administration will finance payment of benefits through the net redemption of the assets in the Trust Fund. Because those assets consist solely of U.S. government securities, their redemption will represent a call on the federal government's general fund, which for decades has been borrowing the Trust Fund's surplus and applying it to its expenses to partially satisfy budget deficits. To finance such a projected call on the general fund, some combination of increasing taxes, cutting other government spending or programs, selling government assets, or borrowing would be required.
Payroll tax rates were cut during 2011 and 2012 as a stimulus measure; these cuts expired at the end of 2012. The Social Security Trustees estimated the amounts at $222 billion total; $108 billion in 2011 and $114 billion in 2012. Transfers of other government funds made the program "whole" as if these tax cuts had not occurred.
In May 2024, the annual trustees report was released with depletion date projections for the funds estimated at 2033 and 2098 respectively and by 2035 when combined however, as of June 2026, it was estimated that the Social Security Trust Fund would be depleted by late 2032 and therefore reduced payments would begin at that time unless Congress acts to improve the situation. At that point, under current law, the system's benefits would have to be paid from the FICA tax alone. Revenues from FICA are projected at that point to be continue to cover about 77% of projected Social Security benefits if no change is made to the current tax and benefit schedules. In a survey of 210 members of the American Economics Association published in November 2006, 85 percent agreed with the statement: "The gap between Social Security funds and expenditures will become unsustainably large within the next fifty years if current policies remain unchanged."
Effect of unemployment on program funding