June 29, 2020

How Will the Coronavirus Pandemic Impact Social Security’s Finances? Here’s What Three Different Analyses Say

The Social Security Board of Trustees has been warning for years that the program faces funding shortfalls. In April, they released their annual report on the trust funds that finance the program. The report projects that the combined Old-Age and Survivor Insurance (OASI) and Disability Insurance (DI) Trust Funds will be depleted in early 2035 — at which point scheduled benefits would be reduced by 21 percent for all beneficiaries. However, the report’s projections, which take an extended time to prepare, did not take into account the effects of the coronavirus (COVID-19) pandemic. Due to the recession caused by the pandemic, program costs and revenues are expected to change in various ways. Below, we review three different projections to see how the pandemic may impact the outlook of Social Security’s finances.

The recession caused by COVID-19 is expected to accelerate the depletion of the Social Security Trust Funds


Penn Wharton Budget Model (PWBM)

PWBM projects that the pandemic will accelerate the depletion of the combined trust funds by two to four years. While PWBM’s pre-pandemic baseline had depletion occurring in 2036 (a year later than estimated by the Social Security actuaries), the group now thinks that depletion could happen in 2034 if there is a one-year economic recovery or 2032 if it takes three years. PWBM identifies six ways that COVID-19 will impact the program’s costs and revenues:

  • a decline in payroll tax revenues due to increased unemployment,
  • a decline in tax revenues due to low inflation that will reduce workers’ earnings,
  • a decline in income earned on the securities held by the trust funds due to low interest rates,
  • a reduction in the cost-of-living adjustments to benefit payments due to low inflation,
  • a reduction in initial benefits claimed at retirement due to depressed earning history of workers and a decrease in the average wage index factor, and
  • a reduction in total benefit payments due to the increased mortality rates of elders.

Under the slow recovery scenario, lower interest income accounts for two years of accelerated depletion.

Bipartisan Policy Center (BPC)

BPC’s estimates show that the Social Security trust funds may be depleted in 2029, which is six years earlier than the Trustees’ projection. The estimates were made by assuming an economic downturn that was equal in size to that of the Great Recession, while accounting for today’s larger beneficiary population, the expansion of unemployment benefits that would likely slow the increase in disability benefit claims, and the increase in mortality. The acceleration of the depletion date in BPC’s analysis is attributed to revenue loss from reduced taxes and a drop in interest income because of lower rates. BPC also simulated a more severe recession with even higher costs and lower revenues, and that scenario resulted in a further acceleration of the depletion date.

Social Security Actuary

During a video conference hosted by the BPC, Stephen Goss, Chief Actuary of the Social Security Administration (SSA), discussed the initial projections of the pandemic’s impact on the trust funds. According to the SSA’s projections, a 15 percent reduction in income from employment earnings and payroll taxes for 2020 would move the depletion date forward to 2034. In an extended economic downturn, during which there is a 15 percent income reduction in each of the next two years, the Social Security trust funds would become depleted by 2033. Those estimates were made in the absence of an increase in the number of beneficiaries and the eventual increase in DI claims, which is expected to be delayed due to expanded unemployment benefits. But the estimates suggest that a deeper, more permanent reduction in economic activity will have a larger impact on the solvency of the trust funds.


All three groups project a more rapid depletion of the Social Security trust funds as a result of the pandemic, though there are important variances based on the assumptions used. All three analyses cite decreased revenues as the primary reason for the acceleration caused by the pandemic, but the depth and extent of the pandemic’s economic impact is still highly uncertain. The projections outlined above are preliminary estimates that introduce the various outcome scenarios, and more time will be needed to accurately understand how the pandemic is affecting the balance of the trust funds. However, it is important to note that the trust funds were already on a path for depletion even before the pandemic. As the recession places additional stress on them, action is needed to put the program’s finances back on a sustainable path.

Related: Spending on Medicaid Is Up 31 Percent Due to the Coronavirus Pandemic

Image credit: Photo by Dia Dipasupil / Staff / Getty Images

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