Social Security Trust Fund

What Is the Social Security Trust Fund?

The Social Security Trust Fund alludes to two accounts utilized by the U.S. government to manage surplus contributions to the Social Security system. It is utilized when contributions made by workers and employers surpass the amount currently expected to fund the system to make scheduled benefits payments to retired workers and individuals with disabilities. The monies held inside the fund are invested in interest-bearing federal securities (Treasury bonds) to increase the value of the fund.

How the Social Security Trust Fund Works

The two funds that make up the Social Security Trust Fund are the Old-Age and Survivors Insurance (OASI) Trust Fund — which pays retirement and survivor benefits — and the Disability Insurance (DI) Trust Fund — which pays disability benefits. They are much of the time considered one fund and alluded to as "the trust fund." The Social Security Trust Fund was made to account for an anticipated future shortfall in benefits expected to pay retired grown-ups through Social Security benefits payments.

Following an increase in the Social Security payroll tax during the 1980s, the excess contributions from the tax increase were kept into the Social Security Trust Fund to be utilized sometime not too far off when the current assets of the Social Security system are at this point not adequate to cover their obligation. The asset reserves of the combined trust funds amounted to nearly $2.9 trillion as of June 2021. For more data, the Social Security Administration (SSA) gives a FAQ guide covering the trust funds.

2034

The year wherein the Social Security Trust Fund is projected to run out of money.

Special Considerations

Under current projections, the combined Social Security Trust Funds will run a deficit (where annual costs will surpass income) for 2021. With the assets currently in the funds, interest, and the value of redeemable Treasury bonds, full benefits will be payable until 2033, at which point the combined funds will run out. From that point forward, Social Security will actually want to keep on paying 76% of scheduled benefits from annual tax income.

Several thoughts have been considered to address the approaching shortfall, for example, raising the retirement age, expanding taxes, cutting spending and benefits, and borrowing more.

Now and again funds in the trust fund are utilized for purposes other than providing Social Security benefits. Such a practice makes a federal budgetary obligation (as part of the national debt or intra-governmental debt) to the Social Security Administration, which Congress can decide to abstain from paying back by sanctioning legislation.

Features

• It puts any surplus in generally safe government securities that earn interest and are backed by the full faith and credit of the U.S. government.
• The trust fund is expected to stop running a surplus in 2021, when it should bit by bit draw down its reserves to pay benefits.
• The 2021 Social Security Trustees Report shows that retirement/survivor and disability funds will run out in 2034.
• The Social Security Trust Fund gets payroll taxes and pays out benefits to participants.