The recent increase to Social Security’s deficit is manageable and unlikely to be severely impacted by the unfolding economic implications of the COVID-19 pandemic, according to new research from The Center on Retirement Research at Boston College (CRR).
Social Security’s Financial Outlook: The 2020 Update in Perspective indicates that while the trust fund depletion date still stands at 2035, long-term negative impacts are unlikely. Further, this pandemic has highlighted the importance of Social Security to older Americans. For millions, their monthly checks are the only steady source of income in retirement.
It’s important to recognize that depletion of the fund doesn’t mean bankruptcy for Social Security. Revenue from payroll tax covers 79 percent of the current benefits, according to the research, but relying on this revenue would mean a drop in the replacement rate in years to come.
While Social Security does face a funding shortfall, it only accounts for about one percent of the total U.S. gross domestic product, and dramatic events such as the COVID-19 pandemic are unlikely to have long-term implications on the funding status. If anything, the pandemic has proven the importance of reliable and steady retirement income, the research indicates.