Baby boomers are collecting 265% of what they paid into Social Security—and millennials are paying the price

Millennials and baby boomers are the two generations that are bearing the brunt of Social Security's financial imbalance. According to a recent analysis from the Committee for a Responsible Federal Budget, baby boomers are set to collect around 133% of what they and their employers paid into the system, while millennials are the ones paying the price.

In nominal dollars, a median-wage retiree in 2027 can expect to receive about $730,000 in lifetime benefits, compared to less than $200,000 paid in taxes by that worker and their employer. The pattern holds true across all income levels, with even the wealthiest retirees collecting roughly double their own direct payments. This surplus is not being paid for by an accumulated boomer nest egg, but rather by the payroll taxes taken from the working-age population today, which is increasingly composed of millennials.

The reason Social Security can operate this way is due to its pay-as-you-go system, which relies on enough workers paying in to cover the retirees drawing out. However, the worker-to-beneficiary ratio has been shrinking for decades, going from 16 covered workers per beneficiary in 1950 to around 2.7 workers per beneficiary today.

This decline in the ratio is the reason why benefits are running ahead of what individual retirees paid in. Social Security was never designed as a savings program, and benefits are not calculated based on workers' payroll tax contributions. Instead, it is a system where current workers' payroll taxes directly finance the benefits of current retirees.

When there were 16 workers per retiree, the arithmetic worked fine, but as the ratio has changed, it has become increasingly unsustainable. The retirement trust fund is projected to be depleted in 2032, leaving only about 78% of scheduled benefits covered by incoming payroll taxes after that point.