There is little argument that Social Security is our nation's most important social program. Every month, more than 64 million people collect a benefit check, 45 million of whom are retired workers. Of these 64 million beneficiaries, well over a third are pulled out of poverty because of their Social Security payout.

What's more, the Social Security Administration (SSA) finds that 62% of retired workers lean on their monthly payout to account for at least half their income. Without this guaranteed benefit, poverty rates for the elderly in the U.S. would skyrocket.

Two Social Security cards lying atop and partially covering a one hundred dollar bill.

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Are Social Security benefits in jeopardy because of COVID-19?

Having consistently paid benefits to retired workers for more than 80 years has been a blessing. But the spread of the COVID-19 coronavirus has some folks clearly worried that Social Security retirement benefits and/or disability benefits could be disrupted or halted.

The good news is that there's no truth to these rumors, with the SSA noting on its website that direct-deposit payouts will continue as scheduled. Mailed checks should arrive as per the norm, assuming no local post office closures, though the agency does encourage its recipients to go to the United States Postal Service website to learn more, and also suggests beneficiaries sign up online for direct deposit.

But just because Social Security payouts won't be interrupted doesn't mean it's going to be businesses as usual for the SSA.

Earlier this month, on March 17, the SSA wound up suspending in-person services at all of its offices throughout the country. Since a majority of Social Security beneficiaries are elderly, and the elderly are one of the most at-risk groups for COVID-19, the SSA decision to close offices and mandate a work-from-home policy for its employees was made with the best intentions of beneficiaries in mind.

An elderly couple sharing a laptop.

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For folks needing to contact the SSA or make account changes, the agency suggests using its online portal. People with a "my Social Security" account can do a lot more than they probably realize online, including apply for benefits and set up direct deposit. SSA employees will also be available by phone to answer questions and help guide users through the online portal.

The SSA has also cautioned about an uptick in scams as coronavirus mitigation measures have become more stringent. The agency wants to remind current beneficiaries that it will not be suspending or discontinuing benefits just because its in-person services are closed. If you get a call from anyone making such a claim, it's a scam. 

Here's what Social Security beneficiaries should really be worried about

The good news is that no matter what coronavirus throws our way in terms of short-term economic disruptions, it's not going to hurt the ability of the SSA to get payouts to its more than 64 million beneficiaries.

Social Security recipients also don't have to worry about insolvency. Two of the program's three sources of funding -- its 12.4% payroll tax on earned income and the taxation of benefits – will continue generating revenue for the program as long as Americans keep working. This ensures that Social Security can't go bankrupt, no matter how abysmal the economic outlook gets.

There is, however, a tangible impact that could be felt on the Social Security program over the longer run. The mitigation measures being put in place to slow the spread of coronavirus and keep our healthcare system from becoming overwhelmed will curb economic activity significantly for the next couple of weeks or months. That's a problem when the payroll tax on earned income accounts for more than 88% of the program's revenue generation.

An accountant chewing on a pencil while closely examining figures from his printing calculator.

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The Social Security Board of Trustees has long been counting on the program to hit an inflection point, whereby it expends more than it collects in a given year. The program hasn't seen a net-cash outflow since 1982, but was forecast by the 2019 Trustees report to expend $4.3 billion more than it collects in 2020. Assuming we do see a somewhat extended halt to nonessential economic activity in major U.S. markets, and therefore less in the way of payroll tax collection, it would not be surprising in the least to see this estimated net-cash outflow come in massively higher than expected in 2020.

The way this impacts Social Security is by drawing down on the program's $2.9 trillion in asset reserves (i.e., its net-cash surpluses built up since inception). The Trustees report forecast a complete exhaustion of this $2.9 trillion due to net-cash outflows by 2035. But a significant uptick in outflows beginning in 2020 as a direct result of coronavirus may wind up shortening the time before the program depletes its asset reserves.

When Social Security's asset reserves are gone, it'll be time to reduce benefits across the board to remain solvent. Once again, Social Security cannot go bankrupt. But without its asset reserves, it also can't maintain the existing payout schedule, inclusive of cost-of-living adjustments. In short, coronavirus may wind up pushing Social Security beneficiaries even closer to a benefit cut of up to 23% than they were at the beginning of the year.