Social Security

Social Security funds plummeted last year as the recession cut revenue and unemployed Americans retired to collect benefits.

For the past 25 years, Social Security has taken in more payroll taxes than it paid out in benefits with the excess funds accumulating in a trust fund to pay future benefits. But last year, the surplus was nearly wiped out. The system collected just $3 billion more than it paid retirees and disabled Americans, a drop of $60 billion from the previous year.

Even last year's cushion is expected to disappear. Congressional Budget Office estimates put the system in the red for this year and 2011.

Stephen Goss, chief actuary for the Social Security Administration, told USA Today, "Things are a little bit worse than had been expected."

Fewer workers meant less money going into the system. Payroll tax revenue that had been growing at 4.5 percent a year dropped as unemployment rose. Older, unemployed workers also turned to Social Security. The number of retirees taking benefits increased 20 percent with disability recipients up 10 percent.

Beneficiaries also received more in Social Security benefits that were hiked almost 6 percent to adjust for high energy costs in 2008.

The short-term shortfall in the next couple of years can be covered by the $2.5 trillion trust fund, but the system still faces looming baby-boomer retirements in the next few years, which will create annual losses starting in 2016 or 2017. Without changes, the trust fund will run out of money by 2037.

Reforms enacted in 1983 helped strengthen the system through higher payroll taxes, raising the retirement age and other measures. But attempts since then to improve Social Security's solvency have been unsuccessful. The unexpected drop in revenue is a wake-up call to Congress and the White House to enact further reforms to maintain the system millions of Americans expect to rely on in their retirement.