Title: Social Security Reform

Description: Social Security makes up a substantial percentage of the
retirement income for many older Americans. But significant financial
challenges threaten the government's ability to continue paying benefits
in full. GAO's Kris Nguyen discusses our new report on this issue.

Related GAO Work: GAO-23-106667, Social Security Series Part 1: The
Dilemma

Released: May 2023

[Music]

[Kris Nguyen:] Early action would allow our citizens to adjust for any
changes and make better plans for their retirement security.

[Holly Hobbs:] Hi and welcome to GAO's Watchdog Report. Your source for
fact-based, nonpartisan news and information from the U.S. Government
Accountability Office. I'm your host, Holly Hobbs. For many older
Americans, Social Security makes up a substantial percentage of their
overall retirement income. But significant financial challenges threaten
the government's ability to continue paying benefits in full. To tell us
more about these shortages is Kris Nguyen, an expert on retirement
security. Thanks for joining us.

[Kris Nguyen:] Thanks for having me.

[Holly Hobbs:] So, Kris, this is our first report in a series about
Social Security reform. Maybe you could start us off with why are we
doing this series, and what do we think the urgency is that needs
highlighted?

[Kris Nguyen:] As many of us know, Social Security is a significant
source of income for millions of Americans. And 66 million Americans
rely on Social Security for either retirement benefits or disability
benefits. And for some, Social Security may be the sole source of
retirement benefits. The focus of our three part series is on the
retirement benefits, the Old-Age and Survivors Insurance program,
because of the financial challenges. We believe that it's important for
us to focus on Social Security because of its significance to many
Americans, as well as because of the misperceptions about the financial
challenges associated with Social Security. So we can clarify these
issues, and highlight some potential options for solutions.

[Holly Hobbs:] So what is the Old-Age and Survivors Insurance program,
and how does it fit into what we think of as Social Security?

[Kris Nguyen:] So, these are really the benefits that most people think
of when they think of Social Security. They make up most of the Social
Security program. The Old-Age and Survivors Insurance program provides
monthly benefits to retired workers. And, in some cases, their
dependents and survivors. The program is funded through Social Security
payroll taxes. So it's the payroll taxes that pay for our benefits.

[Holly Hobbs:] If there's money coming in, through payroll taxes, why is
it at risk of not having enough money to pay full benefits?

[Kris Nguyen:] So, since 2010, the program has been paying more benefits
than it has collected in Social Security taxes. So to cover this
imbalance, Social Security Administration has had to draw on the
program's surpluses. So it's the reserve that is projected to be
depleted by 2033. So if no action is taken, it's the reserve or the
surplus that is projected to be depleted. And at which point the program
will not be able to cover full benefits, but rather 77% of the scheduled
benefits.

[Holly Hobbs:] So what are the options for addressing the shortfall?

[Kris Nguyen:] We've been discussing the imbalance between the benefits
and the revenues. These are the elements that would have to be
considered for addressing the financial challenges with Social Security.
The Social Security trustees report suggest that early action would be
advisable. Also, early action would allow our citizens to adjust for any
changes and make better plans for their retirement security.

{MUSIC}

[Holly Hobbs:] So Kris just told us that when we think of Social
Security in terms of monthly benefits, we're thinking of the Old-Age and
Survivors Insurance program, which is at risk of not being able to pay
full benefits if action isn't taken. So Kris, since this is just our
first report in the series, could you tell us a little bit about our
upcoming work?

[Kris Nguyen:] So the first report covers how the program works, the
challenges and why the need for reform. Our second report will cover the
criteria for evaluating options for reforms. And lastly, the third part
will cover the proposed actions that have been provided by Congress, as
well as experts.

[Holly Hobbs:] When will we get the next reports?

[Kris Nguyen:] The second and the third reports will be coming out later
this summer.

[Holly Hobbs:] And last question, what's the bottom line of this report?

[Kris Nguyen:] The bottom line is that early action reduces the stress
of change. And based on our analysis of the Trustees report, each year
of inaction increases the magnitude of the changes that will be needed
to ensure Social Security can contribute to pay for full benefits over
the long term. Earlier action, as well as more certainty about future
changes, would give our citizens the ability to factor in these changes
to their retirement planning.

[Holly Hobbs:] That was Kris Nguyen talking about GAO's recent report on
Social Security reform. Thanks for your time, Kris.

[Kris Nguyen:] Thank you.

[Holly Hobbs:] And thank you for listening to the Watchdog Report. To
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