Good to Know

What do you think of first when someone says, “victim of COVID-19?” Most of us think of medically vulnerable fellow citizens or business failures. But what about Social Security’s health?

Before answering that question, let’s recognize a few fundamental forces behind Social Security’s financial challenges:

  • Social Security become law in 1935 and, under the original legislation, workers could begin taking retirement benefits at age 65. Interesting fact - average life expectancy then was about 65 years. Make of that what you will!
    • Predictably, the Social Security Trust Fund’s balance experienced growth with that highly favorable set of actuarial factors.
    • Sadly, many workers failed to live long enough to collect benefits.
  • Fast forward to 2020 – The average life expectancy in the U.S. is about 79 years. Social Security retirement age is now as early as age 62 (with reduced benefits) and normal retirement age is age 65 through 67, depending upon one’s birth year. Simply put, average life expectancy has grown to age 79 but Social Security’s retirement age has changed little since 1935. Bottom line – workers are living longer and collecting benefits longer, frequently much longer.
  • There are a number of other factors beyond scope for this blog, such as increases in the amount of wages subject to Social Security taxes and the addition of other benefit programs to the 1935 version of the law. However, the net effect is that the U.S. Treasury is disbursing far more in Social Security benefits than we are collecting in Social Security taxes.

Now let’s discuss Social Security’s health. The 2020 [Social Security] Trustees report contained two closely watched statistical probabilities:

  • Retirement and survivors’ benefits are projected to be paid in full until 2034. After that year, only 76% of benefits will be paid.
  • Disability benefits are projected to be paid in full until 2065. After that date, 92% of benefits will be paid.

If those projections sound familiar, they are substantially unchanged since the 2019 Trustees Report.

But here’s the problem – the 2020 report does NOT reflect the tidal wave of unemployment claims since COVID-19. As of today, over 41 million claims for unemployment have been made since the virus began in the U.S. Think through that staggering number for a moment - that’s more than the total population of California.

Now consider the impact of unemployment on Social Security. Almost 90% of retirement and survivors’ benefits are funded from Social Security payroll taxes.


Early estimates of the impact of the virus upon Social Security project that, if the economy recovers “soon,” the retirement portion of the trust fund will be sufficiently funded to pay out full benefits until about 2032, a two-year decrease from the most recent projection. The temptation is to assume Congress will “fix” Social Security before it fails. If the past is any indicator, that’s an optimistic assumption. While this blog is purposefully politically neutral and will remain so, it’s hard not to see COVID-19 as a clarion call for our national leadership to restore actuarial soundness to this key national social insurance program.


The information presented herein is provided purely for educational purposes and to raise awareness of these issues; it is not meant to provide and should not be used to provide financial advice to clients. There are variations, alternatives, and exceptions to this material that could not be covered within the scope of this blog.