Social Security and Medicare Funds At Risk Even Before Coronavirus

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11. This has been a known problem for many decades - that the retired population keeps growing

while the working population (who are paying into Social Security through their payroll taxes) is stagnant. There has been a long decline in the worker-to-retiree ratio, and this decline will continue for a number of years.

Simply put, our 12.4% of payroll that we and our employers in combination pay into Social Security (and taxes paid on SS benefits) is not enough with today's demographics to pay all SS benefits. And even less so in the future.

For decades before 2010, what we and our employers paid in (and taxes paid on SS benefits) was more than enough to pay current SS benefits, so the surplus revenue that SS got was loaned to the federal government which issued bonds to the Social Security Trust Fund (SSTF).

Beginning in 2010, it reached the point that what was being paid in through payroll taxes etc. was not sufficient to meet SS benefits, but the interest earned by the securities in the SSTF was more than enough to make up the difference, and thus the SSTF continued to grow. (As of year end 2019, the SSTF was $2.9 Trillion)

Beginning in 2021 (next year!), according to the just-released 2020 Social Security Trustees Report,
https://www.ssa.gov/oact/TRSUM/index.html

even including the interest income, the income is not enough to pay current benefits. Therefore, some of the securities in the SSTF will have to be redeemed in order to fully pay promised benefits. (When this happens, the Treasury's general fund gives money to SS in exchange for the same amount of SSTF securities)

By 2035 (just 15 years from now), it is projected that the SSTF will be depleted.

For decades, under both Democratic and Republican administrations, the SS Trustees have been projecting this depletion to occur in or around 2035 plus or minus a few years. So this isn't just some RepubliCON scare-mongering.

So what happens when the SSTF runs out?

By current law, benefits have to be cut to the level that is matched by SS revenue from the payroll taxes (and taxation of SS benefits). This is enough to fund only about 79% of promised SS benefits ...

"After the depletion of reserves, continuing tax income would be sufficient to pay 79 percent of scheduled benefits in 2035, and 73 percent by 2094."

CAUTION:

"The projections and analysis in these reports do not reflect the potential effects of the COVID-19 pandemic on the Social Security and Medicare programs. Given the uncertainty associated with these impacts, the Trustees believe that it is not possible to adjust their estimates accurately at this time."