Retirement & Financial Planning Report

Social Security has been paying out more than it takes in from payroll taxes and interest credited by the Treasury since 2010.

GAO has underscored the financial challenges facing Social Security, largely due to demographic factors whose implications have been clear for years but that have gone largely unaddressed in that time.

In recent congressional testimony, GAO said that due to a combination of fewer births following the baby boom generation and longer life expectancies, 16 percent of the U.S. population is now 65 or older, up from 9.2 percent in 1960 and set to jump to 20.6 percent in 11 years and continue rising over the following 30 years to 23.4 percent.

That also means that the ratio of those paying into the program vs. those drawing benefits from it will fall from today’s 2.8 to 1 to 2.5 to 1 in 2025. At that point, the much-reported “10,000 people retiring every day”—actually, turning age 65, the traditional standard Social Security retirement age—will peak at 11,600 a day.

The ratio of workers to beneficiaries is already down substantially from the 4.0 to 1 of 1965; in 1955, it was 8.6 to 1. And it will fall further to 2.2 to 1 in 16 years, GAO said. By that time GAO projects that the old-age insurance trust fund will be depleted and income to the program will be sufficient to cover only 77 percent of promised benefits.

Social Security has been paying out more than it takes in from payroll taxes and interest credited by the Treasury since 2010—about the time the earliest of the baby boomers first became eligible for benefits on turning age 62—drawing down the trust fund that had built up in prior years.

“It is difficult to predict exactly what would occur if either Social Security’s retirement or disability programs were to become insolvent because the Social Security Act does not provide for any procedure for paying less than full benefits. According to SSA, benefits could be reduced across the board by a set percentage, certain benefits could be prioritized, or benefits could be delayed,” GAO said.