Tens of millions of Americans lost their jobs due to Covid-19. Their loss of income caused problems for themselves and their families – and for the Social Security system.
The problem is that the Social Security system is paying out more money to retirees than it collects from workers. You see, the money coming out of your paycheck does not fund your future retirement. Instead, your money is given to current retirees; the next generation to pay for your benefits, and the generation after that will pay for theirs.
This is how the Social System has always worked. It’s performed just fine, thank you, for decades — because we always had lots more workers than retirees. Indeed, when the program started in 1935, there were 150 workers for every retiree. They provided more money than was needed to pay benefits, so the excess was placed into a trust fund. Today, it holds about $3 trillion.
But the worker/retiree ratio has shifted radically over the decades and Covid-19 made it worse by throwing tens of millions out of work. The result: there are now only three workers for every retiree.
The result is that the system is paying out more in benefits each year than it collects in payroll taxes. To cover the shortfall, SSA has been dipping into the trust fund. By 2033, SSA’s trustees now say, the trust fund will be depleted. When that happens, the only money SSA will be able to distribute to retirees is the money it collects from workers. That’s enough to cover only 76% of retiree benefits.
In other words, all retirees will suffer a Social Security benefit cut of 24%, starting in 2033. This would be a huge financial crisis for our nation. The average monthly check is about $1,400. For most retirees, it’s the majority of their income. If this situation isn’t averted, millions of retirees will lose their homes, be unable to pay for medicine and health care and suffer other financial challenges.
Solving the problem means cutting benefits and/or raising taxes, a problem for members of Congress seeking re-election. This is why Congress has largely ignored the issue, even though they all know this crisis is coming. To get Congress to act, I created the Funding Our Future Coalition in 2018, now the largest organization of its kind, with more than 50 academic institutions, non-profit groups, think tanks and corporate partners working together to get Congress to fix this problem.