Social Security is a financial lifeline that allows more Americans than you probably realize to make ends meet. Data from the Social Security Administration shows that 34% of retired workers are pretty much wholly reliant on their monthly payout to account for 90% to 100% of their income. Overall, just over three out of five retired workers lean on Social Security for at least half of their monthly income. This guaranteed check is what keeps an estimated 15.1 million seniors out of poverty, according to the Center on Budget Policy and Priorities. 

Social Security's front-and-center problems

Unfortunately, America's most important social program is skating on thin ice. Both national surveys and the latest report from the Social Security Board of Trustees suggest that there are genuine reasons to be worried about Social Security's future.

Social Security cards lying atop a benefits calculation card, and next to a small pile of hundred dollar bills.

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The newest projections from the Board of Trustees call for a major shift in 2022. After four decades of the program building up its asset reserves to an expected $3 trillion by the end of 2021, the Trustees believe that Social Security will begin paying out more in benefits than it's generating in revenue beginning in 2022. Not long thereafter, in 2034, this $3 trillion in built-up excess cash will be completely exhausted. The end result, per the report, is a potential across-the-board cut in current and future benefits of up to 23%. Doing so would presumably sustain payouts through the year 2091, without the need for any additional cuts. 

What's causing this crisis for Social Security? The two most front-and-center scapegoats continue to be the baby boomers and increased longevity.

The first problem being that approximately 4 million baby boomers a year are becoming eligible to receive Social Security benefits. As these boomers eventually move into retirement, there simply aren't enough new workers to take their place. This is expected to push the worker-to-beneficiary ratio from 2.8-to-1 in 2017 to 2.2-to-1 by 2035. 

The other primary issue is increased longevity. Since 1960, the average American is living nine years longer, and data from the Social Security Administration shows that the average 65-year-old is expected to live another 20 years. When signed into law in 1935, the Social Security Act was only expected to provide benefits to retirees for a few years. Over time, that's evolved into "a few decades," and is ultimately believed to be straining the program.

A scowling wealthy elderly man in a suit.

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These behind-the-scenes issues are just as alarming

But what if I told you that Social Security's woes couldn't be adequately summarized by the ideas that boomers are retiring and we're living longer? There are other, behind-the-scenes, issues at play -- and here are four of them.

1. Income inequality

One prominent theme that probably isn't being given enough credit for Social Security's problems is income inequality. The well-to-do have virtually no issue accessing preventative medical care and medicine on an as-needed basis. In other words, the financial cost of obtaining care isn't an obstacle. That's not always the case for lower-income workers who may not be able to afford preventative care and/or medicine, even with the assistance of a program like Obamacare (officially, the Affordable Care Act).

The ability of the wealthy to access medical care has allowed them to live notably longer than lower-income workers. Not only does this mean that the rich can collect a payout for an extended period of time, but since Social Security benefits are based on earnings, among other things, it also means that the well-to-do are probably collecting a higher-than-average retired worker benefit for an extended period of time. That's a major drain on Social Security.

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2. A period of historically low lending rates

Some of the blame also should be placed on the shoulders of the Federal Reserve. Understandably, I'm not oblivious to the role that the nation's central bank played in helping to stabilize a very fragile stock market and financial industry back in 2008-2009. However, it's been walking on eggshells for nearly a decade now, and for a period of seven years, between December 2008 and December 2015, its federal funds target rate was kept at a historically low range of 0% to 0.25%.

So, what's the issue with low lending rates, you ask? Namely, that the Fed's actions have reduced yields on interest-bearing assets, including the special-issue bonds and certificates of indebtedness that the program's asset reserves are invested in. As a result, the average yield on Social Security's excess cash has been steadily falling, resulting in lower-than-expected interest income for the program.

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3. Low fertility rates

Another behind-the-scenes concern is shrinking birth rates in America. The latest figures from the Centers for Disease Control and Prevention showed just 1.76 lifetime births per woman, which represents a 40-year low. The problem here is that if fertility rates don't increase, future generations won't have enough workers or revenue to meet the Trustees' projections. In other words, there might be a need to cut benefits once again, many years down the road, if fertility rates don't rebound.

A low fertility rate scenario was examined in the 2017 Trustees report, and the long-term results were terrifying. While it tends to not have a big impact in the near or intermediate term, by 2091, program expenditures exceed income by 4.48% at the baseline and 5.97% in the low-fertility scenario. In layman's terms, this means the current 12.4% payroll tax on wage income, which is the primary funding mechanism for Social Security, would need to rise to 18.37% under the low-fertility scenario (a modeled 1.8 lifetime births per woman) for the program to remain solvent, without cutting benefits. That's scary. 

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4. Congress' inability to agree on anything

Finally, the federal government deserves its fair share of the blame. Though Congress isn't responsible for low birth rates or when baby boomers were born, lawmakers on Capitol Hill have nonetheless known for decades that Social Security was facing a funding shortfall. Currently, that shortfall stands at an estimated $12.5 trillion between 2034 and 2091. The issue is that lawmakers can't agree on what to do to fix things.

Democrats would prefer raising or eliminating the maximum taxable earnings cap associated with the payroll tax. This would mean that the wealthy would pay more each year, raising revenue and erasing the 75-year funding shortfall in its entirety.

Meanwhile, Republicans favor increasing the full retirement age -- the age at which you become eligible to receive 100% of your retirement benefit, as determined by your birth year -- from age 67 to between ages 68 and 70. In doing so, it would require workers to either wait longer to receive their full payout or to accept a steeper permanent reduction should they claim benefit early. Either way, it would reduce the program's long-term expenditures and completely abate the shortfall.

Both of these fixes work -- and that's the problem. Neither party will back down from their core proposal and find a middle ground with the other party. Until that happens, Congress' inaction might be the biggest behind-the-scenes issue for Social Security.