How Will COVID-19 Excess Mortality Affect Social Security Benefit Payouts?

We project the impact of excess mortality during the COVID-19 pandemic on future Social Security Old-Age and Survivors Insurance (OASI) payouts. The magnitude of the reduction in future payouts will depend not only on the magnitude of excess mortality by age, but also on the underlying life expectancies of those who fell victim. The impact will be smaller if excess COVID-19 mortality was concentrated among those who were already frail. It will also be offset by survivor benefit payouts to spouses of COVID-19 victims. We calculate the overall reduction in future Social Security net benefit payouts to be small. The fundamental reason is that excess mortality did not lead to a substantial reduction in life-years lost. A simple model implemented as a starting point suggests average life-years lost of about one month during 2020. We also undertake a careful projection of benefit payouts given COVID-19 mortality through late 2021 versus a counterfactual of pre-COVID-19 mortality, using several data sources. For individuals 55 and older who are nationally representative of the 2015 noninstitutionalized population, we project a reduction in net benefit payouts of $131 billion in present value, or 0.5% of benefits payable to that group in the absence of COVID.-19 This is a slight underestimate because of the following factors omitted from our calculations: excess mortality of those who were younger than 55 and of those who were institutionalized. Our analysis suggests that the major impact of the pandemic on the OASI trust fund operated through labor markets rather than excess mortality.