AARP: Social Security Would Have Collected $10.8 Trillion More if the Economy Had Not Shifted

A new AARP report says Social Security's money troubles come in large part from how the American economy has changed. The research, released November 11, finds that a shrinking share of the nation's income is subject to the payroll tax that funds the program.

In 1983, earnings taxed for Social Security equaled about 41 percent of the country's total economic output. By 2025, that share had fallen to 34 percent, and AARP expects it to stay near that level. More pay now comes in forms that escape the payroll tax, including wages above the annual cap. AARP estimates the program would have collected an extra $10.8 trillion over the 50 years from 1984 through 2034, a period that includes projected future years. Measured against the program's combined trust funds, which the study says would otherwise run short in 2034, that extra money would have been enough to pay full benefits until 2059.

The nearer deadline involves retirement and survivor benefits. The Social Security Administration projects that the trust fund paying those benefits will run out of reserves in late 2032. If Congress does nothing, incoming payroll taxes could then cover only about 78 percent of scheduled retirement and survivor benefits. The separate fund that pays disability benefits is in far better shape, with reserves projected to last through 2100.

"Social Security's finances have weakened in large part because the economy has changed while its revenue system has not," said Rich Johnson, AARP's vice president of financial security.

The report points to possible fixes, including raising or removing the cap on earnings subject to the tax and applying contributions to some forms of capital or business income. Any change would have to come from Congress, and lawmakers have not settled on a plan.

The stakes are broad. AARP's polling finds that 80 percent of all voters, and 90 percent of older voters, say protecting Social Security is very or extremely important. For anyone 50 or older, the 2032 date is close enough to matter. A person who is 59 today will be 65 when the shortfall arrives if nothing changes. Financial planners generally advise against panic, since Congress has closed similar gaps before, but they also suggest building savings that do not depend on a single source of retirement income.