Social Security is a vital program for many Americans, with about one in five people in the United States receiving benefits in 2025. Both major political parties have been hesitant to cut Social Security benefits or raise payroll taxes. However, the economic reality is that changes to the program will be necessary within the next decade.
If Congress does not take action, Social Security will only be able to cover 79% of promised benefits starting in 2033. Addressing the Social Security shortfall provides an opportunity to comprehensively examine how policy can best help people manage retirement risks. Social Security has been instrumental in reducing elderly poverty since its establishment after the Great Depression.
Retirement benefits make up almost 80% of total Social Security benefits. These are awarded to those who have worked a certain number of years and are at least 62 years old. Social Security also provides disability and survivorship benefits.
The monthly Social Security benefit is not intended to replace all of a worker’s prior earnings. For a worker with very low career earnings, Social Security benefits can replace about 80% of prior earnings. For the highest-earning workers, the replacement rate is around 28%.
Social Security sustainability for future generations
Social Security operates on a pay-as-you-go system, where current workers’ payroll taxes fund the benefits of current retirees. This system worked well when the baby boom generation entered the workforce.
However, since the early 2000s, the number of workers relative to retirees has been declining, raising concerns about the program’s sustainability. Trustees of the Social Security Trust Fund have projected for several years that the program has promised more benefits than it can pay. The Retirement and Survivors Program Trust Fund is expected to be depleted by 2033.
At that point, only incoming revenue will be available to pay benefits, covering just about 79% of scheduled payments. There is uncertainty about how to bridge the gap between funds coming in and benefits promised. It is unclear whether beneficiaries will face benefit cuts, taxpayers will see increased taxes, or some other solution will be devised.
While Social Security and Medicare have dramatically reduced elderly poverty, some groups still face persistent challenges. Survivor benefits may not adequately cover all costs incurred by a surviving spouse. Medicare also does not cover everything, leaving significant copayments and deductibles that burden individuals.
The future of Social Security remains uncertain. Policymakers will need to make deliberate efforts to address its shortfalls and ensure the program’s sustainability for future generations.