Another dire problem for Social Security: Trustees may be calculating the birth rate wrong

By Jessica Hall

Don't expect a baby boom to save Social Security

The U.S. fertility rate hit a record low in 2024, with the average American woman having only 1.6 children.

Social Security's finances may be in worse shape than thought.

The Social Security Trustees - who release a report each year on the health of the program that supports about 70 million retirees and people with disabilities - have been relying on overly optimistic forecasts for future fertility rates, according to a blog report from the Cato Institute.

Those forecasts are at odds with projections from the U.S. Census Bureau and the Congressional Budget Office (CBO) - the nonpartisan federal agency that provides Congress with independent analysis of budgetary and economic issues - which both have much more sober forecasts for fertility rates.

Fertility rates and longevity are important to the finances of Social Security. Under a "pay-as-you-go" system like Social Security, taxes from current workers pay the benefits of current retirees. As fewer young people enter the labor force, there are fewer active taxpayers to support each beneficiary at a time when people are living longer - and taking benefits for longer.

"The Trustees are likely understating Social Security's insolvency problem by assuming Americans will start having far more children than current trends suggest," according to the Cato Institute, a libertarian think tank.

"Optimistic population assumptions translate into optimistic financial projections. In a pay-as-you-go system like Social Security, higher assumed fertility means more future workers paying taxes to finance benefits and thus a smaller projected shortfall," the Cato blog report said.

If fertility instead follows projections from the CBO or the Census Bureau, Social Security's 75-year deficit rises to at least $30 trillion - which is $3 trillion bigger than what the Trustees and the Social Security Administration project. That's nearly as large as the $31 trillion of all publicly held federal debt, Romina Boccia, director of budget and entitlement policy at the Cato Institute, told MarketWatch.

The Trustees assume that the current fertility rate of about 1.6 children per woman will increase to 1.9 by the early 2040s, the Cato Institute said. By 2100, the SSA projects a total fertility rate roughly 30% higher than both the Census Bureau and the CBO, which expect fertility to continue to decline.

The U.S. fertility rate hit a record low in 2024, with the average American woman having only 1.6 children - which was consistent with declining fertility rates globally. But that's below the rate of 2.1 children needed to sustain a stable population, according to the Johns Hopkins Bloomberg School of Public Health.

The Cato Institute's findings come as the Social Security Trustees are expected to release their annual assessment on the health of Social Security and its expected insolvency date. An exact date for the Trustees report was not immediately available.

The Old-Age and Survivors Insurance Trust Fund - which pays monthly benefits to retired workers, their families and survivors of deceased workers - is projected to face insolvency and automatic benefit cuts in 2032, according to projections from the CBO as well as Social Security Chief Actuary Karen Glenn.

Last year, the Trustees projected 2033 as the insolvency date. At the time of depletion, the fund would be able to pay only 77% of scheduled benefits, the Trustees said at that time.

Since last year's report, however, Republicans' One Big Beautiful Bill Act was signed into law, which included a temporary enhanced tax deduction for older Americans that will further weigh on the trust fund's finances, likely moving the date up a year sooner to 2032, said Boccia.

The Trustees also may update their long-term forecast and fertility expectations in the new report, but it's unclear whether they will adhere to the CBO and Census Bureau forecasts, Boccia said.

There are two dates in the Trustees report that are crucial for Social Security. One is the insolvency date, which will show when the trust fund backing Social Security will be depleted and can no longer pay out full benefits, unless changes are made by Congress to bolster the system. The other is the 75-year forecast, showing the overall size and scope of the long-term shortfall in the system.

"The Trustees' fertility assumptions are not a technical footnote. Because Social Security is financed on a pay-as-you-go basis, fertility projections directly shape estimates of the program's long-run solvency. If the Trustees' fertility assumptions are too optimistic, then Social Security's financing gap is significantly larger than official projections suggest," the Cato blog report said.

New AARP research found that 37% of older adults feel financially insecure, while 60% are worried about having enough money to last through retirement. Among those not yet retired, 42% have less than $50,000 in retirement savings, the advocacy group for older adults said.

Meanwhile, 61% of older Americans say the average Social Security monthly payment - around $2,000 per month - is not enough, and 69% say that prices are rising faster than their income.

"With prices rising for everyday essentials like groceries, housing, utilities and healthcare, current and future retirees are counting on Social Security now more than ever," said Nancy LeaMond, executive vice president and chief advocacy and engagement officer at AARP. "The bottom line is that Social Security is the critical foundation of retirement security that Americans have earned through a lifetime of hard work, paying in with every paycheck. It must be strengthened and protected."

As Congress faces potential Social Security changes in the coming years, it should be cautious about relying on the Trustees' demographic assumptions that overestimate the future size of the workforce and the program's future revenue base, Boccia said.

According to Boccia, Congress should explore why the Trustees' fertility projections appear to be so different from other forecasts, and the Social Security Advisory Board should reconvene the Technical Panel on Assumptions and Methods to get a better handle on future fertility rates.

-Jessica Hall

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06-02-26 0858ET