What significant challenge does Social Security face due to demographic changes?

The significant challenge that Social Security faces due to demographic changes is primarily the phenomenon of more retirees and fewer workers contributing to the system. This situation arises from an aging population and longer life expectancies, which result in an increasing number of individuals receiving benefits for extended periods. At the same time, the ratio of workers who are actively contributing to the Social Security fund is declining, primarily due to lower birth rates over recent decades and the fact that the large Baby Boomer generation is now retiring.

As the workforce shrinks relative to the growing number of beneficiaries, Social Security's financial sustainability is strained. This imbalance can lead to higher costs for the system, as the income generated from payroll taxes may not be sufficient to cover the growing payouts to retirees. Addressing this challenge is crucial for maintaining the program's viability for future generations.