Are Social Security trust funds at greater risk due to COVID-19?

The pandemic’s economic impact has put pressure on the long-term financial status of Social Security funding

On April 22, 2020, the Social Security Board of Trustees issued its annual report on the health of the Social Security trust funds in which they projected that the long-term financial status of the trust funds remains virtually unchanged. As reported last year, the trust funds’ combined asset reserves will be depleted in 2035; at that time, without reform, income will be sufficient to pay 79% of scheduled benefits.

However, some organizations that monitor Social Security policy and funding issues have expressed concern that the current economic downturn resulting from the onset of the coronavirus may lead to the reserves being depleted faster than those projections, especially given that the effects of the pandemic were not factored in to the trustees’ report.

The Bipartisan Policy Center (BPC), a Washington-based think tank, estimates the combined Social Security trust funds could be depleted as early as 2029 if the impact of the current economic slowdown is similar in duration and intensity to the one during the Great Recession of 2008 and 2009. The BPC notes in its recent report that there are a variety of factors in play:

  • Social Security benefits depend on payroll taxes; layoffs and cuts in hours will reduce the revenue coming in (from both the employee and employer) from that source.
  • Social Security recipients pay taxes on benefits if their individual income exceeds $25,000 ($32,000 for couples who file jointly); job interruptions threaten that revenue, as well.
  • The Federal Reserve’s decision to cut interest rates will lower the yield on bonds held by the Social Security trust funds.
  • A wave of older workers who are forced to retire earlier than they had hoped will likely lead more to claim Social Security retirement benefits, raising costs in the short term.

Short-term outlook worsens, but long-term solutions remain the same

Alicia Munnell, director of the Center for Retirement Research at Boston College, projects a Social Security trust fund exhaust date two years sooner than the trustees’ report — in 2033 —  because of the economic fallout from the coronavirus. While she concedes that the pandemic has worsened the outlook for the Social Security trust funds in the short run, she said that the long-term solutions remain the same: putting more money into the system or cutting benefits (or some combination of the two).

In her analysis of the latest Social Security trustees report, she writes, “The pandemic has underscored the importance of Social Security as a critical and reliable source of support for retirees and those with disabilities. The program faces a manageable financial shortfall over the next 75 years which — once COVID-19 is under control — should be addressed so that Americans will have confidence that the program will be able to pay the full amount of promised benefits.”

As always, we’ll keep you posted.


ASPPA Net, “Social Security trust funds projections unchanged, Board of Trustees says,” John Iekel, April 24, 2020

BenefitsPRO, “4 factors affecting Social Security’s future,” Marlene Satter, April 29, 2020

NAPA Net, “Social Security trust funds at heightened risk from COVID-19,” John Iekel, April 29, 2020

PlanSponsor, “Employees need review of Social Security strategies during financial crisis,” Amanda Umpierrez, April 30, 2020

Horsesmouth (Savvy Social Security), “Social Security and Medicare trustees reports released,” Elaine Floyd, April 30, 2020

Investment News, “Pandemic will deplete Social Security trust funds,” Mary Beth Franklin, May 5, 2020

Important information

Blog header image: Raymond Forbes LLC / Stocksy

Jon Vogler
Senior Analyst
Retirement Research, Invesco Consulting

Senior Analyst Jon Vogler draws on extensive pension expertise to offer retirement thought leadership for Invesco. In addition to writing Invesco’s Retirement blog, he tracks legislative and regulatory developments and contributes as a writer and editor to a variety of retirement-related Invesco communications.

Prior to joining Invesco in 2008, Jon spent more than 25 years in the research, writing, compliance and underwriting areas of the retirement services industry, including roles as a senior consultant at Mutual Benefit Life’s pension consulting firm and as a compliance manager in the Automatic Data Processing retirement services division.

Jon earned the Fellow, Life Management Institute (FLMI) and Competent Toastmaster (CTM) designations. He has a B.A. in History from Rutgers, The State University of New Jersey.

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