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Americans have had plenty of notice that they shouldn't pin too much hope for a comfortable retirement on Social Security.

For years, the government has tucked an ominous warning into the statements it mails to workers each year estimating how much they'll collect from Social Security when they retire. The warning says, in effect: All bets could be off if Congress decides to change the program.

Many Americans might have skipped that fine print. But few could have missed the alarm President Bush sounded last year when he declared that Social Security is "going broke."

For months, Bush crisscrossed the country, pushing a plan to dramatically redesign the program that for decades has been a lifeline for elderly Americans. But the effort was a bust. Nearly a year after Bush gave up his crusade, the subject is all but dead on Capitol Hill.

The problem facing Social Security has hardly vanished, however. Though many experts take a much less dire view of the program's health than Bush, virtually all agree that Congress will end up changing it — and that the changes could hurt many future retirees.

"We don't face an immediate crisis in Social Security, but we have a large and growing problem," says U.S. Comptroller General David Walker. "If you're 55-plus, you have little or nothing to worry about. If you're below 55, then the younger you are, the more changes are likely to occur with regard to your Social Security. But you will get something. And you will have time to make adjustments before you reach retirement."

The main problem facing Social Security is demographic. To understand it, it helps to know how the system works.

The program essentially operates on a "pay-as-you-go" basis, meaning it doesn't set aside money in advance to pay retirees' benefits. Instead, it uses Social Security taxes withheld from today's workers to pay benefits for today's retirees. The system works well as long as enough workers are contributing taxes to cover the cost of benefits.

In recent years, thanks to the hordes of baby boomers in the work force, the program has been running large surpluses. The trouble will come when boomers, who were born between 1946 and 1964, retire. The first boomers will be eligible for early retirement in 2008.

As more boomers retire, the cost of benefits will soar, but the number of workers contributing taxes isn't expected to rise fast enough to pay the higher tab.

"The baby boomers per se aren't really the problem," says Stephen Goss, chief actuary at the Social Security Administration. "The real problem is that the baby boomers didn't keep it up. They didn't keep having a lot of babies."

Because boomers had fewer children than their parents, the ratio of workers to beneficiaries is expected to fall from 3-to-1 today to barely 2-to-1 by 2040. Meanwhile, baby boomers are expected to collect benefits longer than their parents because medical advances are allowing retirees to live longer.

Calculating exactly when the crunch will come, and how bad it will be, is complicated.

The outlook could improve if more immigrants enter the work force than expected, if fertility rates rise, and if large numbers of baby boomers work past their retirement age. The situation could worsen if the opposite happens.

Social Security's trustees, in their latest report, project that the government will begin collecting less in taxes than it needs to pay benefits starting in 2017. From then until 2040, Social Security will be able to continue paying the full benefits promised to retirees by tapping the surplus it has built up.

Once the surplus runs dry in 2040, the trustees project, Social Security will be able to pay only 74 percent of the benefits promised under current law.

How worried Americans should be by such numbers is a matter of intense debate. Many experts emphasize that even if Congress does nothing to improve Social Security's finances, the system will never run out of money. It will continue to be able to pay benefits, though less than promised, as long as workers continue paying taxes.

"It is never going to go out of business," says Walker, who heads Congress' Government Accountability Office.

Goss, the chief actuary, points out also that under current law, benefits are calculated in a way that not only shields retirees from inflation, but also allows their standard of living to improve. As a result, he says, a retiree getting 74 percent of what he's owed in 2040 would fare better than he would today.

On the negative side, however, many experts say it is a mistake for Americans to simply assume that Social Security can automatically pay full benefits until 2040. They note that the surplus exists only on paper in the form of IOUs, because the government hasn't stashed it in an untouchable "lockbox" or savings account.

Instead, the annual surpluses have been invested in interest-bearing U.S. government securities, and Congress has borrowed that money to pay for all sorts of programs in the federal government's annual budgets, with the understanding that it will repay the Social Security trust fund when the money is needed.

The problem facing Social Security is that nobody knows where Congress will find the money to repay what it owes. Congress could borrow the money, cut other programs or raise taxes. But none of these are appetizing options for politicians.

Moreover, at the same time that Congress will have to confront Social Security's shortfall, it also will have to find money to address much deeper financial problems facing Medicare.

The challenge wouldn't be so daunting if the government's overall finances were in better shape. But it has built up vast debts over the years by spending more money than it raised.

"The problem is not a Social Security problem; it's an absence of the government balancing revenues and expenditures," says Dallas Salisbury, president of the nonpartisan Employee Benefit Research Institute.

If Congress had been balancing its budgets, or better yet running surpluses, repaying Social Security would be far easier. But annual deficits, compounded in recent years by the costs of the Iraq war, Hurricane Katrina and Bush's tax cuts, have lifted the national debt to $8.3 trillion — an increase of about $2.5 trillion during the last five years alone.

"What we're doing now just doesn't make sense; we should be paying down debt," says Sen. George Voinovich, R-Ohio, who has proposed legislation that would invest Social Security's surpluses in securities Congress couldn't use to finance other government spending.

In 1983, Congress enacted changes in Social Security to strengthen the program and cushion the cost of boomers' retirements, including a gradual hike in the retirement age to 67.

With elections looming this fall, nobody expects Congress to take up an issue as controversial as Social Security this year. But Bush says he hasn't given up on reforming the program, and analysts say it's at least remotely conceivable he could revive the issue next year.

"If we can't get it done this year, I'm going to try next year," Bush told an audience in Washington a few weeks ago. "And if we can't get it done next year, I'm going to try the year after that."

In the meantime, workers trying to plan for retirement can make some educated guesses about what sort of fixes are likely to be considered and who is most likely to be affected.

Congress is virtually certain to shield people who are already retired from any changes, experts say. It is also likely to try to protect people close to retirement who have little time to adjust to changes, and people with low incomes who stand to collect the least from Social Security.

That means the people likely to be hit hardest by changes are younger and middle-age workers and those with moderate to high incomes.

Will the changes be tax increases? Benefit cuts? An increase in the retirement age?

"We've got to do at least one of these. We'll probably do a combination," predicts Goss.

How individual retirees will fare depends on which combination Congress chooses.

Salisbury predicts that politicians will not cut very deeply into benefit checks, because they will fear a backlash from boomers, who form a powerful voting bloc. Boomers, he says, are likely to view Social Security as "ever more valuable and ever more necessary" as they watch private pensions fade away and realize they haven't saved enough for retirement.

These are some of the changes most likely to be considered:

● Raise Social Security payroll taxes above today's 12.4 percent rate, which is divided equally between workers and employers (each pays 6.2 percent).

● Increase the amount of income that is subject to Social Security taxes. Workers now pay taxes on income only up to a cap ($94,200 in 2006). In turn, they get no credit toward their retirement benefit for income above the cap.

● Raise the retirement age, which now ranges from 65 for people born before 1938 to 67 for people born in 1960 or later.

● Use a less generous formula for calculating benefits. This could affect all workers, or hit higher-income workers harder than lower-income workers.

● Use a less generous formula for calculating annual cost-of-living adjustments.

● Establish individual retirement accounts within Social Security that allow workers to invest in stock and bond funds. This could be done by diverting a percentage of workers' Social Security payroll taxes into the accounts, as Bush proposed last year. But Democrats are more likely to be receptive to accounts if they are designed instead as an "add-on" to traditional benefits.

Winners and losers

Any changes will require picking winners and losers. Plenty of arguments are likely to arise about who gains and who suffers.

Among those:

● Is it fair to raise the retirement age for everyone when some people start working in their teens and others wait until after they collect advanced degrees? Is it fair to require manual laborers to work as late in life as people who have desk jobs?

● Is the system fair to groups, such as black Americans, who tend to die earlier and collect benefits for fewer years?

● Should benefits be adjusted for people other than retirees who get money from Social Security? This category includes the disabled and spouses and children of people who earned Social Security benefits.

● Should Social Security be oriented more to helping the poor, or should it continue giving somewhat higher benefits to people who contribute more to it?

Most experts agree that as a technical matter, finding ways to stabilize Social Security's finances isn't hard. But what may seem easy in theory could be excruciating politically.

"The reason it's difficult politically is it touches everyone," says John Rother, policy director for AARP. "So many Americans don't have a pension now and aren't really saving up money. Social Security is what they'll have, period. And so any time you touch it, it's of great concern to most people. You're really talking about their standard of living in the future."