Millions of Americans rely on Social Security for financial well-being, and not just senior citizens. In fact, nearly 61.5 million retirees, survivors, disabled workers, and their dependents receive Social Security benefits.
Unfortunately, the Social Security program isn't on the best financial footing right now. Here are eight statistics you may not be aware of that can give you a snapshot of Social Security in America, the headwinds facing the program, and what could be done to fix the problem before it's too late.
1. Millions of Americans rely on Social Security for their well-being in retirement
In 2017, about $955 billion in Social Security benefits will be paid out, with the average retired worker receiving $1,360 per month. For the average elderly American, Social Security benefits represent 34% of their income.
However, many retirees are far more reliant on their benefits. The majority of elderly Americans receive more than half of their income from Social Security, and 21% of elderly married couples and 43% of elderly singles receive nearly all of their income from their Social Security benefits.
2. Social Security keeps millions of retirees out of poverty
According to the Center on Budget and Policy Priorities, 41.5% of elderly Americans would be living in poverty if not for Social Security, which currently keeps the rate of impoverished elderly Americans to 10%. In all, the Social Security programs keeps approximately 14.5 million elderly Americans out of poverty.
3. Only 68% of Social Security beneficiaries are retired workers
As I mentioned in the introduction, there's a lot more to Social Security than just retirement benefits. In fact, 32% of the program's beneficiaries fall into other categories. In addition to providing benefits for retired workers, Social Security provides income for:
- 4 million spouses of retired workers
- 686,000 children of retired workers
- Over 6 million survivors, such as widow(er)s and children of deceased workers
- 8 million disabled workers
- 8 million spouses and children of disabled workers
4. Why Social Security will run out of reserves
Since 1970, the U.S. population has increased by about 57%, so you may think the number of Social Security beneficiaries has increased at a similar rate. However, the total number of Social Security Old-Age and Survivors Insurance beneficiaries has grown from about 23 million to 50.3 million, which represents growth of 119%. This sums up Social Security's main financial problem: With the ongoing retirement of the Baby Boomer generation, there are more Social Security beneficiaries per worker than ever before.
5. Social Security can only pay all of its benefits for another 17 years
With all of the negative headlines about Social Security, it may surprise you to learn that the program is actually expected to run a surplus for the next few years. Starting in 2020, however, deficits are expected for the foreseeable future, and it will become necessary to tap into Social Security's reserves, which currently total about $2.8 trillion. According to the annual Social Security trustees' report, the trust fund that holds these reserves is expected to be completely depleted by 2034, after which point the incoming tax revenues will only be enough to pay about three-fourths of promised benefits.
6. It's only going to get worse
I already mentioned that the ratio of Social Security beneficiaries to workers has risen. To put some numbers behind that statement, consider that during the period from 1974 through 2008, there were 3.2 to 3.4 workers paying into the system for every Social Security beneficiary. Now, the workers-to-beneficiaries ratio has fallen to 2.8. Even worse, it's expected to continue to fall over the coming decades until there are only about two workers for every beneficiary. That's why deficits are expected for the foreseeable future.
7. We need to increase Social Security revenue by 1.7% of GDP -- or cut benefits
According to data from the Congressional Budget Office (CBO) and my own estimates, in order to make Social Security viable over the long run, we need to make cuts, or increase revenue, by an amount equivalent to 1.7% of the national GDP.
As an example, increasing the Social Security payroll tax by 2% over a 10-year period would increase Social Security's revenue by 0.6% of GDP. Meanwhile, eliminating the taxable wage cap without increasing benefits would further increase revenue by 1.1% of GDP, so the combination of these two changes would (theoretically) fix the problem.
8. Most Americans are fine with higher Social Security taxes
Not only could Social Security be fixed by increasing payroll taxes, but surveys have indicated that most Americans would be fine with it. A study by the National Academy of Social Insurance found that 77% of Americans, including a clear majority of Republicans, agree that it's critical to preserve Social Security benefits, even if it means higher taxes for working Americans. A whopping 83% agree with the same statement if it means raising taxes on high earners.
The bottom line is that while Social Security is not in the best financial shape, it's not too late to make the program viable for generations to come. Furthermore, Americans have indicated that they're willing to pay more to make it happen. Whether something will be done to fix Social Security remains to be seen, but it is certainly possible.