For more than eight decades, Social Security has been the most important government program for retirees. Even though the average monthly benefit of $1,980.86 (as of February 2025) is relatively modest, this payout plays a key role in forging the financial foundation for many retired workers.
In each of the last 23 years, national pollster Gallup has surveyed retirees to determine how important their monthly check is from Social Security. In every poll, between 80% and 90% of retirees have noted they require their payout, in some capacity, to cover their expenses.
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While Social Security has historically been a fortress of stability since the first retired-worker check was mailed out in January 1940, America’s leading retirement program is on anything but stable ground today. The possibility of benefit cuts is rapidly approaching and many folks are asking: Is immigration to blame for Social Security’s worsening financial outlook?
Image source: Getty Images.
For 85 years, the Social Security Board of Trustees has released an annual report detailing the financial health of Social Security. This report allows anyone to examine how the program collects income and where those dollars end up.
More importantly, the Trustees Report is known for making data-driven projections about the future financial health of Social Security. The Trustees take into account changes in fiscal and monetary policy, as well as a host of demographic shifts, when estimating how financially sound the program is for future generations of beneficiaries.
For 40 consecutive years, the Trustees have cautioned that long-term (defined as the 75 years following the release of a report) income collection won’t be sufficient to cover outlays, such as benefits and, to a lesser degree, administrative expenses. This long-term funding obligation shortfall had grown to a whopping $23.2 trillion, as of 2024.
What’s even more worrisome is the Trustees’ outlook for the Old-Age and Survivors Insurance Trust Fund (OASI). According to the 2024 Trustees Report, the OASI’s asset reserves are expected to be exhausted by 2033.
The good news is that the OASI doesn’t require asset reserves to remain solvent. As long as people continue to work and pay their taxes, the 12.4% payroll tax that’s the primary funding mechanism of Social Security will ensure that eligible beneficiaries receive a monthly check. In other words, there’s no danger of bankruptcy or insolvency for the OASI or Social Security.
However, the absence of the OASI’s asset reserves would signal that the existing payout schedule, including annual cost-of-living adjustments (COLAs), isn’t sustainable. Per the Trustees, a 21% reduction to Social Security checks may be needed by 2033 (if the asset reserves are fully depleted) to avoid any further reductions through 2098.
The OASI’s asset reserves are on track to be depleted by 2033. US Old-Age and Survivors Insurance Trust Fund Assets at End of Year data by YCharts.
Social Security’s widening long-term funding deficit, as well as its shrinking OASI asset reserves, points to trouble for America’s leading retirement program. The big question is: “What’s led to these issues?”
On social media message boards, it’s not uncommon to see posts assigning blame to migrants coming to America. In particular, some share the opinion that undocumented migrants have drained Social Security’s asset reserves.
What can be said with concrete certainty is that immigration is to blame for some of Social Security’s financial downfall…but not for any of the reasons often cited on social media message boards.
Legal migration into the U.S. is a necessity for Social Security’s financial health. Most migrants that legally come to America are young, and will therefore spend decades in the labor force contributing via the payroll tax before one day collecting a Social Security retired-worker benefit of their own. This steady influx of legal migrants is needed to counterbalance workers retiring from the labor force.
Based on data from the United Nations, the U.S. net migration rate (i.e., the people legally entering the U.S. minus those leaving the country) was nearly halved between 1997 and 2023. Since peaking at 1,866,819 in 1997, net migration tumbled to 999,700 in 2023.
According to the intermediate-model forecast from the 2024 Trustees Report — the intermediate model is the model that’s considered likeliest to occur — the U.S. needs to average 1,244,000 legal net migrants per year (through 2098) to stay on the current course, which is the aforementioned long-term funding shortfall of $23.2 trillion. With not even 1 million net legal migrants entering the country in 2023, it signals that Social Security’s 75-year funding shortfall is likely to grow.
In short, Social Security’s immigration problem boils down to not enough legal migrants entering the country.
Image source: Getty Images.
However, one aspect of immigration that’s absolutely not an issue for the traditional Social Security program is undocumented migrants.
The reason undocumented migrants are often blamed for Social Security’s financial woes likely has to do with people conflating the traditional Social Security program, which pays retired-worker, disability, and survivor benefits, with Supplemental Security Income (SSI), which provides payments to people with limited income and resources. Though the Social Security Administration oversees both programs, they’re completely separate and funded differently.
SSI can provide income to asylum seekers, and is funded entirely through the General Fund.
In comparison, the traditional Social Security program is funded by the 12.4% payroll tax on earned income, the taxation of Social Security benefits, and the interest income generated from its asset reserves, which is invested in special-issue government bonds, as required by law. Undocumented workers are unable to receive a retired-worker benefit, and they’re afforded none of the disability or survivor beneficiary protections tied to the traditional Social Security program.
And interestingly enough, undocumented migrants do positively impact Social Security. Based on a 2014 analysis from New American Economy — “a bipartisan research and advocacy organization” — researchers estimate that undocumented workers contributed $100 billion to Social Security over the previous decade. To put this into some context, around 1% of Social Security’s annual income can be attributed to undocumented migrants who won’t receive a dime in future benefits.
Immigration absolutely is part of the reason Social Security is eight years away from sweeping benefits cuts — but it’s a story of too few legal migrants and has nothing to do with undocumented workers taking benefits from the program.
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Social Security Benefit Cuts Are an Estimated 8 Years Away — Is Immigration to Blame? was originally published by The Motley Fool
