How Much Money The US Really Spends On Social Security Every Year

From funding shortfalls to political differences, Social Security has faced years of uncertainty, which has left the future of Social Security fairly unclear (and could largely depend on the outcome of the presidential election). While each political party has a fundamentally different view of how to manage and/or potentially change Social Security, ultimately, it's Congress that must come up with any potential reforms. In an increasingly divisive political environment, though, this can be much easier said than done.

In the meantime, almost 68 million people currently receive Social Security benefits in 2024. This includes old-age and survivors benefits, as well as disability insurance benefits. To put that in different terms, as of fiscal year 2023, Social Security benefits made up 22% of the total federal budget. With that in mind, it's worth mentioning that Social Security benefits don't always require the same outlay of funds. For instance, in some years, benefits have cost as little as 0.22% of the federal outlay (during WWII) up to their highest cost, 23.2%, in 2001.

However, the growth of Social Security beneficiaries in more recent years has steadily pushed annual costs up. Since 1990, there has been an 84% increase in the number of disabled-worker beneficiaries, a 105% increase in disabled widow(er)s, and a 24% increase in the number of disabled adult children. Not to mention the silver tsunami of baby boomers entering retirement; from 1970 to the end of 2023, the amount of Social Security beneficiaries has increased a whopping 261%, with the majority of those beneficiaries being retirees.

While you might see the number $1.35 trillion and balk at the price tag, it's important to understand exactly what the money is going toward. For starters, 85% of the total Social Security budget (or $1.15 trillion) goes toward paying out retirement benefits to roughly 50 million retired workers (and their 2.6 million dependents). Another 11% of Social Security's budget goes toward paying disability benefits to 7.4 million disabled workers (and their 1.1 million dependents). The last 4% of Social Security's budget pays out other benefits like survivors benefits (which 5.8 million people receive benefits for). The average monthly benefit amount for Social Security recipients (as of September 2024) is $1,873 for retirees, $1,402 for disability recipients, and $1,509 for survivors.

Another important thing to know is how exactly Social Security's funding works. Currently, Social Security is funded through two separate trust funds, the Old-Age and Survivors Insurance fund, and the Disability Insurance fund. As of the end of 2023, these two funds were worth about $2.8 trillion, through their two main sources of money. First, almost all U.S. workers pay into these funds through payroll taxes (and matched employer contributions). Current estimates are that about 183 million workers contributed $1.2 trillion to the trust funds in 2023. Second, the funds also generate their own money through interest and income taxes on benefits. Combined, this provided the funds with another $118 billion. However, even with these two sources of income, the funds ran a deficit of $41 billion in 2023.

As the Social Security program continues to run at a deficit, it'll eventually deplete its two trust funds entirely. Recently, the future of Social Security got slightly clearer when the Social Security Administration's Board of Trustees reassessed its projections in May 2024; Social Security is now currently set to run out of its trust funds in 2035. Now, what this means is that the program will no longer be able to offer its full benefit amounts to beneficiaries. Since the amount of money the program pulls in through income taxes is only part of the program's overall necessary budget, the shortfall of losing the trust funds (and accompanying interest on those funds) will leave retirees receiving only about 83% of their scheduled full benefit amounts every month.

Despite this budgetary cliff, it has been difficult to make any political progress toward solving Social Security's impending insolvency. Martin O'Malley, the commissioner of Social Security, stated in a press release: "Congress can and should take action to extend the financial health of the Trust Fund into the foreseeable future, just as it did in the past on a bipartisan basis. Eliminating the shortfall will bring peace of mind to Social Security's 70 million-plus beneficiaries, the 180 million workers and their families who contribute to Social Security, and the entire nation."

Depending on the political outcome of the presidential election, increased taxes on the wealthy, delayed retirement ages, or even cuts to disability benefits could be potentially used as tactics to prolong Social Security's existence.