Social Security Financial Challenges and Sustainable Development Goals (SDGs) Report

Despite the absence of legislative action by Congress, it is widely recognized that Social Security’s reserve funds are approaching depletion, and payroll tax revenues will soon be insufficient to meet projected future benefit obligations. This report highlights the current financial status of Social Security, emphasizing its implications in the context of the United Nations Sustainable Development Goals (SDGs), particularly SDG 1 (No Poverty), SDG 3 (Good Health and Well-being), and SDG 10 (Reduced Inequalities).

Annual Trustees Reports and Financial Outlook

Each year, the Board of Trustees for the Federal Old-Age and Survivors Insurance (OASI) Trust Fund and the Federal Disability Insurance (DI) Trust Fund publishes an annual report detailing the financial health of Social Security programs. The 2025 report delivers concerning news regarding the sustainability of benefits for retirees.

Accelerated Insolvency Timeline

Social Security faces mounting financial pressures due to demographic shifts, including an aging population and a declining ratio of workers to retirees. According to the Population Reference Bureau (PRB), the number of Americans aged 65 and older is projected to increase from 58 million in 2022 to 82 million by 2050, raising their population share from 17% to 23%.

Currently, when payroll tax revenues fall short of covering scheduled benefits, the Social Security Administration utilizes the OASI trust fund. Upon depletion of this fund, it may seek congressional approval to access the smaller DI trust fund.

1. Last year’s report projected trust fund depletion by 2035, with tax revenues covering only 83% of scheduled benefits thereafter.
2. The 2025 report revises this timeline, anticipating depletion by 2034, with coverage dropping to 77% of scheduled benefits.

This accelerated depletion is partly attributed to the enactment of the Social Security Fairness Act, which eliminated the Windfall Elimination Provision (WEP) and Government Pension Offset (GPO). These provisions previously reduced benefits for certain federal and state employees, including teachers, firefighters, police officers, and federal workers under alternative pension systems.

• WEP and GPO removal increases benefit payouts, impacting fund sustainability.
• Additional factors include revised assumptions on fertility rates and wage growth, leading to lower payroll tax revenues.

Implications for Sustainable Development Goals

The financial challenges facing Social Security have direct implications for several SDGs:

• SDG 1 (No Poverty): Social Security benefits are a critical income source for many retirees, helping to prevent poverty among the elderly population.
• SDG 3 (Good Health and Well-being): Adequate benefits support access to healthcare and essential services for older adults.
• SDG 10 (Reduced Inequalities): Social Security programs contribute to reducing income inequality by providing financial support to vulnerable populations.

Legislative Prospects and Policy Options

Given the widespread reliance on Social Security benefits, it is anticipated that Congress will eventually enact measures to address the funding shortfall, although potentially at a late stage. The critical nature of these benefits for retirees’ housing, healthcare, and food security underscores the urgency of sustainable solutions aligned with SDG targets.

Potential Policy Approaches

1. Benefit Adjustments: Reducing benefits or modifying eligibility criteria, such as increasing the retirement age.
2. Tax Reforms: Increasing payroll tax rates or raising the taxable income cap, currently set at $176,100 for 2025.

Political perspectives vary, with some advocating for benefit curtailments and others favoring tax increases, particularly targeting higher-income earners. These decisions will be pivotal in ensuring the long-term viability of Social Security and advancing the SDGs related to poverty alleviation and social equity.

Conclusion

The impending depletion of Social Security trust funds presents a significant challenge with broad social and economic consequences. Addressing this issue through informed policy decisions is essential to uphold the principles of the Sustainable Development Goals, ensuring financial security and well-being for current and future generations of retirees.

1. Sustainable Development Goals (SDGs) Addressed or Connected

1. SDG 1: No Poverty
   • The article highlights the risk of reduced Social Security benefits, which could increase poverty among retirees who rely on these benefits as their primary income source.
2. SDG 3: Good Health and Well-being
   • Social Security benefits are critical for retirees to cover healthcare expenses, linking the issue to ensuring healthy lives and well-being for all ages.
3. SDG 8: Decent Work and Economic Growth
   • The article discusses payroll taxes and employment contributions to Social Security, which relate to promoting sustained economic growth and decent work conditions.
4. SDG 10: Reduced Inequalities
   • The elimination of provisions like the Windfall Elimination Provision (WEP) and Government Pension Offset (GPO) affects federal and state workers differently, touching on reducing inequalities.
5. SDG 16: Peace, Justice and Strong Institutions
   • The need for Congressional action to reform Social Security relates to building effective, accountable institutions.

2. Specific Targets Under Those SDGs Identified

1. SDG 1: No Poverty
   • Target 1.2: By 2030, reduce at least by half the proportion of men, women and children of all ages living in poverty in all its dimensions.
   • Target 1.3: Implement nationally appropriate social protection systems and measures for all.
2. SDG 3: Good Health and Well-being
   • Target 3.8: Achieve universal health coverage, including financial risk protection and access to quality essential healthcare services.
3. SDG 8: Decent Work and Economic Growth
   • Target 8.5: Achieve full and productive employment and decent work for all women and men, including young people and persons with disabilities.
   • Target 8.6: Reduce the proportion of youth not in employment, education or training.
4. SDG 10: Reduced Inequalities
   • Target 10.2: Empower and promote the social, economic and political inclusion of all.
5. SDG 16: Peace, Justice and Strong Institutions
   • Target 16.6: Develop effective, accountable and transparent institutions at all levels.

3. Indicators Mentioned or Implied to Measure Progress

1. Social Security Trust Fund Reserves
   • Indicator: The year in which the Social Security trust funds are projected to be depleted (e.g., 2034 or 2035).
   • This measures the financial sustainability of the Social Security program.
2. Coverage Ratio of Scheduled Benefits
   • Indicator: Percentage of scheduled Social Security benefits that can be covered by payroll tax revenue (e.g., 77% or 83%).
   • This reflects the adequacy of funding to meet retirees’ needs.
3. Population Demographics
   • Indicator: Proportion of the population aged 65 and older (projected increase from 17% to 23%).
   • This demographic data impacts the sustainability of social protection systems.
4. Payroll Tax Rates and Caps
   • Indicator: Payroll tax rate (12.4%) and income cap subject to taxation ($176,100 in 2025).
   • These measure the revenue side of Social Security funding.
5. Legislative Changes Impacting Benefits
   • Indicator: Changes such as elimination of WEP and GPO provisions affecting benefit eligibility and amounts.
   • These indicate policy measures influencing social protection coverage and equity.

4. Table: SDGs, Targets and Indicators

Source: fool.com