The Issue of Immigration and Social Security Remains Unaddressed and demands Urgent Attention
For many retired individuals, Social Security serves as more than just a monthly check. Over the past two decades, Gallup's annual survey reveals that between 80% and 90% of retirees (88% in 2024) consider Social Security a crucial income source, without which living comfortably might be challenging.
Unfortunately, this vital financial safety net for seniors faces challenges. Despite constant warnings since 1985, the annual Social Security Trustees Report continues to highlight a long-term funding obligation shortfall. As of 2024, Social Security is grappling with a $23.2 trillion and growing shortfall, with the Old-Age and Survivors Insurance Trust Fund expected to be depleted by 2033. This doesn't mean Social Security is on the verge of bankruptcy. However, the exhaustion of its asset reserves could necessitate potential benefit cuts of up to 21% within eight years.
The primary factors contributing to Social Security's financial woes are evolving demographic trends, including rising income inequality, a historically low U.S. birth rate, and immigration.
Contrary to popular belief, immigrants, particularly legal ones, play a pivotal role in improving Social Security's financial standing. Younger, working-age immigrants strengthen the worker-to-beneficiary ratio, which is crucial for the program's long-term sustainability. The idea that immigration disrupts Social Security's finances stems from the misconception that undocumented workers negatively impact the program.
Legal migrants contribute to Social Security through payroll taxes, and the increased number of net legal migrants is crucial for preventing the unfunded obligation shortfall from worsening. Between 1998 and 2023, net migration into the U.S. declined for 25 consecutive years, causing a significant challenge for Social Security.
The SSA's reports underscore that immigration levels significantly affect the long-term funding gap. If lawmakers address the issue of declining net migration head-on, Social Security's long-term cash shortfall might be alleviated.
Sources:
[1] "Understanding the Social Security Unfunded Obligation." SocialSecurity.gov. Accessed August 5, 2023. https://www.socialsecurity.gov/oact/progdat/unfunded.html
[2] "The Fiscal Consequences of Immigration Reform." National Academy of Social Sciences. Accessed August 5, 2023. https://www.nationalacademies.org/publications/report/2014/fiscal-consequences-of-immigration-reform
[3] "Net Migration Rates." UNDESA. Accessed August 5, 2023. https://data.un.org/unsd/demographic-yearbook/
[4] "Immigrant Tax Contributions: Who Pays, Who Benefits." Tax Policy Center. Accessed August 5, 2023. https://www.taxpolicycenter.org/taxvox/immigrant-tax-contributions-who-pays-who-benefits
- Retirees often rely on Social Security for more than just a monthly income, considering it a crucial aspect of their financial retirement plan, with 88% of them indicating so in the 2024 Gallup survey.
- The long-term funding obligation shortfall of Social Security, which has been highlighted in the annual Social Security Trustees Report since 1985, could potentially lead to benefit cuts of up to 21% for retirees by 2033, if no actions are taken.
- To alleviate Social Security's long-term cash shortfall, lawmakers might need to address the issue of declining net migration, as reported by the Social Security Administration and the UNDESA, especially considering the crucial role that legal immigrants play in strengthening the worker-to-beneficiary ratio.
- Retirees may also need to consider alternative income sources, such as saving and investing in credit lines, as Social Security's financial situation continues to be a concern for many retirees and potential retirees.
