On January 31, 1940, a retired legal secretary from Ludlow, Vermont, named Ida May Fuller received the first monthly Social Security check. It was for $22.54. She had paid $24.75 in payroll taxes over about three years of covered work. Fuller lived to 100 and collected $22,888.92 before she died in 1975, roughly 925 times her contributions, according to the Social Security Administration’s historian.
Congress built a program that, from its inception, constituted an intergenerational transfer. Social Security paid its first retirees for benefits they had barely financed and sent the bill to people not yet born. Eighty-six years later, the program is insolvent but has accrued unfairness in many more ways.
Younger workers
A young worker pays 12.4 percent of wages to Social Security, or 10.6 percent for the retirement program alone. Half comes out of the paycheck, and the employer’s half shows up as lower wages. Within weeks, the money goes out to current retirees.
When benefits began in 1940, Social Security was a transfer from workers to older Americans who were much poorer than they are today. Indeed, benefits now go to the richest age group. In the Federal Reserve’s 2025 Survey of Consumer Finances, households headed by someone 75 or older had the highest median net worth of any age group. Of course, not every senior is rich, but as a group, they are far better off than the young workers paying their benefits.
That’s to the credit of the U.S.’s impressive private sector and capital markets, which dramatically drove down poverty rates among seniors and boosted Americans’ savings. In addition, over the years, Congress raised benefits in election years and indexed new benefits to wages, so each group of retirees has started out ahead of the last. Higher life expectancy means that retirements now last about nine years longer than in 1940. And because the checks go to everyone regardless of need, they kept coming as seniors grew richer.
The Washington Post’s Editorial Board, using IRS data, found that 37 percent of Social Security benefits go to senior households with total annual incomes above $100,000. The Committee for a Responsible Federal Budget counts about 1 million beneficiaries collecting at least $50,000 a year, enough to push some couples’ annual incomes past six figures. Brookings Institution researchers found that seniors in the top income fifth average close to $30,000 a year from Social Security, plus more than $185,000 from other sources.
These facts raise the question of whether it makes sense to continue paying a universal, earnings-related benefit to a prosperous group. There are many reasons to say it doesn’t, and one of them is intergenerational unfairness.
In that context, it makes sense to means-test the program (beyond the existing income tax on benefits for higher-income retirees), or to put a hard cap benefits (beyond the existing cap on benefits that exists because earnings above the taxable maximum aren’t taxed or credited). As I have mentioned before I am partial to move to a flat benefit. By contrast, increasing the payroll tax rate paid by workers would double down on the unfairness.
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So intergenerational unfairness is real. However, this is where things become complicated when thinking of fairness in the context of Social Security. The reason why rich seniors receive large benefits is that their tax bills were large. In an excellent Tax Foundation paper, Alex Durante and Kyle Pomerleau show that Social Security benefits are quite progressive. They cite CBO estimates that households in the bottom fifth of lifetime income collect about two and a half times what they pay in taxes, while households in the top fifth get back roughly what they paid.
A December 2025 Urban Institute report by Eugene Steuerle and Karen Smith does the calculations for individuals.
A single male with low earnings ($35,000 in 2025 dollars) retiring in 2025 can expect about $251,000 in lifetime Social Security benefits for $185,000 of lifetime retirement payroll taxes
A single male with average earnings ($72,300 in 2025 dollars) retiring in 2025 can expect about $414,000 in lifetime Social Security benefits for $412,000 of lifetime retirement payroll taxes
A single male with maximum taxable earnings ($176,100 in 2025 dollars) retiring in 2025 can expect about $666,000 in lifetime Social Security benefits for $1,002,000 of lifetime retirement payroll taxes.
A single woman with the same earnings as a single man pays the same taxes and starts with the same monthly check, yet she collects about 92 cents per dollar of tax, compared with his 83 cents, because she can expect to live longer.
Urban Institute scholars assume the rich and poor live equally long, which understates what high earners collect. A 2014 study by Dana Goldman and Peter Orszag found that men in the top quarter of lifetime earners gained four years of life expectancy at 65 over three decades, far more than men at the bottom. A study published by the Center for Growth and Opportunity estimates that the widening gap has erased about three-quarters of Social Security’s progressivity. Also, a high earner whose spouse stayed home does far better than stated here.
On the other hand, the Urban Institute study leaves the taxation out of its calculations. Including it would widen the gap between lifetime tax paid and lifetime benefits.
That raises some interesting questions. Viewed through this lens, the system’s progressivity suggests that cutting benefits for today’s affluent retirees would make the system even less fair to them. Raising taxes on higher-income workers, as Senator Sanders wants to do, would also double down on this unfairness for higher-income retirees.
If you consider the taxation of Social Security benefits, the current regime is even more progressive. As mentioned earlier, the system already has some forms of means-testing in place:
A backdoor means test: the income tax on benefits for higher-income retirees. Retirees with income below $25,000 (single) and $32,000 (married) do not owe any taxes. Above those thresholds, up to 50 percent, then up to 85 percent, of benefits become taxable at the retiree’s ordinary rates. In effect, it’s a partial means-test, carried out through the tax code. It penalizes retirees who saved for their retirement their whole lives through an IRA, as well as those who keep working. This affects a growing number of retirees as the thresholds have never been indexed, so each year the tax reaches further into the middle class. When the first tier began in 1984, it hit relatively few retirees.
A built-in cap: benefits are limited because earnings above the taxable maximum aren’t taxed or credited, so there’s already a ceiling on benefits.
Finally, Social Security is also quite unfair to dual-income married couples relative to single-income married couples. When a second spouse goes to work, the household’s lifetime earnings and Social Security taxes rise by about 45 percent, yet its lifetime benefits rise by only about 5 percent, according to the Urban Institute’s 2025 estimates comparing a one-earner couple at the average wage with a couple in w
There are other ways the Social Security System is unfair as it is.
The deepest unfairness comes from the fact that taxpayers have no accrued property right to their benefits, no matter how much they have paid in taxes. This denial of property rights is rooted in the U.S. Supreme Court’s 1960 decision, Flemming v. Nestor. Congress may cut benefits, tax them, or rewrite the formula, as it has done in the past and will do in the future, and taxpayers can’t do anything about it.
It also means that a taxpayer who pays payroll taxes for forty years and dies at 63 leaves her or his children nothing from those contributions, apart from any survivor benefits the law allows. Now, some people might say that Social Security is insurance against old-age poverty. Dying younger is like not having to claim an insurance for the risk you were covering against. Nobody complains about years of home or car insurance premiums when they never file a claim. People who die early fund those who live long. I would buy this point if paying into Social Security weren’t mandatory and if the returns for so many people weren’t so meager, and inferior to market outcomes.
Social Security is often portrayed by some as a tool to lift seniors out of poverty, and it does that. It also creates many kinds of unfairness. It redistributes within generations, provides lifetime returns for those who live longer, creates serious intergenerational warfare and other distortions. One thing is sure: another round of payroll tax increases would deepen several of these structurally unfair features.