Why your Social Security check could shrink by nearly 20% — and more if jobs are scarce

RemySci/Tech2025-06-296520

Social Security is facing a shortfall that will hit already-stretched retirees. - Getty Images/iStock

Social Security is hugely important to a large share of Americans. Almost 69 million Americans will receive monthly Social Security benefits in 2025, totaling about $1.6 trillion in benefits paid during the year.

But Social Security will need some kind of reform within the next decade in order for America’s retirees to keep counting on it. Given its funding structure, if Social Security continues to roll forward in its current trajectory, the program will be able to cover just 81% of promised benefits starting in 2034, according to the latest estimates of the Social Security Trust Fund report.

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Congress will need to take action. But both Republicans and Democrats have long been reluctant to reduce Social Security benefits and averse to raising payroll taxes to close the funding gap.

Yet the economic reality can’t be ignored. The way in which Social Security is funded exposes the program to challenges. Unlike other forms of saving for retirement, where workers put away savings into an account that is dedicated to them, this pay-as-you-go system acts more like a checking account: Current workers are paying into the system and the current beneficiaries are receiving those funds out of the program.

This structure did not present a challenge while the baby-boom generation was entering the workforce in the early 1960s, with the share of workers paying into the system rising much faster than the share of the population able to claim benefits. Since the early 2000s the tables have turned: The share of the U.S. population that is 18-64 has been declining while the share that is 65 and older grew at the fastest rate in over a century, going from 13.0% of the total population in 2010 to 16.8% in 2020.

As a result of these opposing trends, while there were about 18 people aged 65 and older for every 100 working-age Americans in 1980, this dependency ratio grew to 30 retirement-age Americans per 100 workers in 2025 (see the chart above). The ratio of retirees to workers is likely to continue increasing beyond the retirement of the baby boomers because of the lower fertility rates that the U.S. has experienced over the past 15 years or so.

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For several years, the trustees of the Social Security Trust Fund have been projecting that the program has promised more benefits than it is able to pay out. According to the latest trustees report, released on June 18, the combined Old-Age, Survivors and Disability Insurance Trust Fund is expected to be depleted in 2034.

At that time, benefits will be paid only from the income that is coming in, as there won’t be anything in the reserves to supplement that income. Legally, the trust fund cannot borrow money. At that point, the trust funds would only be sufficient to pay about 81 cents on every dollar scheduled to be paid.

Unless policymakers make deliberate efforts to clarify how to handle shortfalls, it is likely that the program will face similar uncertainties in the future. Right now, we face uncertainty in how the gap between the funds coming in and the benefits promised will be closed. It is not clear if beneficiaries will face those benefit cuts, if taxpayers will be liable for those tax increases, or something else.

Both the benefits paid and the contributions into Social Security are prescribed by law. This means it’s likely that demographic or economic assumptions will change again at some point in the future, resulting in an imbalance between the benefits that are scheduled to be paid and the revenue that is expected to come in. For example, when there’s an economic downturn, fewer people are working and contributing into the trust fund.

There are other ways in which the retirement security system is lacking that could be addressed. While the existence of Social Security and Medicare have contributed to a dramatic reduction in elderly poverty, some groups face persistent challenges. Although survivor benefits provide helpful protection to surviving spouses, there is some evidence that the existing level of survivor insurance may not be adequate to cover the costs that a surviving spouse incurs. In 2019, among those 60 and over, 16% of new widows lived in poverty, compared to 10% overall.

There remain significant expenditure risks that the elderly face that are not fully addressed by Social Security and Medicare. While Social Security does not provide any kind of medical payments, Medicare provides a source of health insurance for most people over the age of 65. However, Medicare doesn’t cover everything, and there are significant copayments and deductibles that a person may be responsible for.

Read: Trump pledged not to cut Medicare — but his budget bill does just that

For example, annual out-of-pocket spending on healthcare was on average $6,663 for all beneficiaries enrolled in traditional Medicare in 2019, according to a study by AARP. This average out-of-pocket spending for healthcare was equivalent to about 38% of the average annual Social Security retirement benefit ($17,460) in 2019.

Moreover, there is a significant coverage gap regarding long-term care services for chronic conditions. This type of care is costly and largely paid for either out of pocket, through state Medicaid programs for those who qualify, or provided by unpaid caregivers, often spouses and adult children, who indirectly bear the costs through reduced labor force participation and adverse impacts on their own health. A person turning 65 between 2021 and 2025 is estimated to incur, on average, $120,900 in paid long-term care costs, of which 37% is estimated to be paid out of pocket, and the remainder covered by a combination of Medicaid (and other sources of public insurance) and private insurance (see here).

Read: $1 trillion in cuts to Medicaid would have a devastating impact on people receiving long-term care. Here’s why.

Also read: Medicare may actually be in more trouble than Social Security

Difficult — but necessary — choices

What will Social Security reform ultimately look like? The answer is unclear at this stage. Would it be an across-the-board cut or a cut that applies more to certain people than others? Will the burden fall on all U.S. taxpayers or only on current workers? Delaying real discussion about the solutions makes the problems harder to solve. The timeline that the U.S. has to fix it is shorter and the change that is needed is more drastic than it would be otherwise.

While addressing the imminent financial challenges of the program will be unavoidable, Americans shouldn’t just be thinking about the issue of solvency. What is the role of government and markets in providing this protection? How can Americans ensure that their major entitlement programs are solvent and sustainable for the long term? Social Security reform offers an opportunity to take comprehensive look at how policy can best help people manage the risks they face in retirement.

Gopi Shah Goda is director of the Retirement Security Project, the Alice M. Rivlin chair in economic policy and senior fellow in economic studies at the Brookings Institution.

This commentary was originally published by Econofact — “Facing the Social Security Shortfall.”

Also read: As Social Security starts operating under controversial new rules, here’s how they could affect you and your benefits

More: Social Security will stop sending paper checks soon. How to make sure you still get your benefits on time.