Your Social Security Advisor

Raiding the Social Security Trust Fund – Ask Rusty

social security benefitsDear Rusty:  I would like to know how much money has been taken out of Social Security by presidents, and was any paid back with or without interest on the withdrawal?  Signed:  Wants to Know

Dear Wants to Know:  The idea that any President or Congress has taken money out of the Social Security Trust Fund is simply not an accurate description of how the Social Security system works. I know these accusations abound on the internet, normally promoted by someone or some organization trying to further a political agenda. But the reality is that the Social Security program has, since its inception in 1935, been a “pay as you go” system where current workers pay Social Security taxes to fund benefits for current beneficiaries. Over the years, when there were many more workers than beneficiaries, considerably more was taken in than was paid out in benefits and the surplus each year is placed in the Social Security Trust Fund, which as of June 2016 had a value of 2.81 trillion dollars. By law, Social Security is required to invest that surplus in special issue U.S. Treasury securities, not unlike those available to private investors which are backed by the “full faith and credit of the U.S. Government”, but these special issue securities are redeemable at any time at face value. These securities typically yield interest of about 1.5 – 2.375 percent (2016 rates), and this interest aids in growing the value of the trust fund. Now, yes, investing in those securities is technically loaning money from the Trust Fund to the U.S.Treasury, where the money can be used for any purpose the Government sees fit, just like all other revenues the Government collects from anywhere. But that loan and those securities can be called for payment at any time by the Social Security Administration when it needs money to pay benefits to Social Security recipients. So when you read or hear something about Congress or one or the other President “raiding” the Social Security Trust Fund, it is simple hyperbole designed to stir emotion and promote an agenda. The reality is that Social Security must, by law, invest surplus funds in interest-bearing special issue Government securities, essentially loaning money to the U.S. Treasury which must be repaid upon demand.

It’s worthwhile to note here that there are actually two parts to the “trust fund”; one for Old Age and Survivors Insurance (OASI) benefits and another for Disability Insurance (DI) benefits.  Although there is now 2.8 trillion dollars in both of these funds, the current lower ratio of workers to beneficiaries means that both of these funds either already are (as with DI) or soon will (as with OASI) start to be depleted to pay benefits.  This is why you are now hearing concerns about Social Security’s financial solvency.  Current projections by the Funds’ Trustees are that the Disability Insurance fund will be depleted by about 2022 and the OASI fund will be depleted about 2034.  If Congress does not act before then to reform the program, benefits at that time would be limited to paying out only as much as was received in Social Security revenue, which could mean about a 21% reduction in benefits.  However, given the intensity of the spotlight on this issue today, it’s probable that Congressional action will be taken in sufficient time to ensure the program’s solvency for the foreseeable future.

Article By – Russel Gloor, AMAC Certified Social Security Advisor 

The information presented in this article is intended for general information purposes only. The opinions and interpretations expressed in this article are the viewpoints of the AMAC Foundation’s Social Security Advisory staff, trained and accredited under the National Social Security Advisors program of the National Social Security Association, LLC (NSSA). NSSA, the AMAC Foundation, and the Foundation’s Social Security Advisors are not affiliated with or endorsed by the United States Government, the Social Security Administration, or any other state government. Furthermore, the AMAC Foundation and its staff do not provide legal or accounting services. The Foundation welcomes questions from readers regarding Social Security issues. To submit a request, contact the Foundation at [email protected].


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EAA
5 years ago

How much do illegal aliens pay into the social security fund?

Dr. Scott
5 years ago

My last talk to Rep. Upton on this topic was to create a Lockbox Law, that would secure all money associated with social security and Medicare for those systems to be used only for their intended purpose.
His reply, which I posted in previous posts, there’s no interest in that. When I asked him why? He said “Why did Jesse James rob banks?” Answer is that is where the money is.
All funds go to the USA treasury. All payments are out of the same place. There’s no real Trust Fund. What is paid in the whole thing is used plus the amount of debt that is added to our total of about $20Trillion plus the unfunded liabilities of only God knows what that is.
Rusty might have a view from what we’re told about the truth to the system, but the fact is a horse of a different color.
He stated that in a 4 – 5 years span the system is not solvent. Hence why I asked for a Lockbox Law, to protect the actual funds from misuse, transfer to another system like Ocare did with nearly a trillion dollars, or any other.
Let me ask you retired folks, can you afford a 21% cut?

Jim
5 years ago

How many people have pass away only a few years short of 65. They paid the SS tax all their working life. I personally knew folks in that scenario. The politicians just got free money to spend for their pork barrel projects. And yes, our SS and DI accounts are full of iou’s that will never be paid back! It is a crime against the American people. I really think the wool has been pulled over our eyes to hide the truth. We have so many socialists with a wide range of liberal thought that we as Americans owe everybody benefits they never earned. That is a huge drain that needs to be stopped………..

Steve
5 years ago

There are actually three trust funds. The two mentioned in the article, plus the health insurance fund. As far a benefits, there are many receiving who never paid into the system, such as illegal immigrants who marry a native citizen, as well as their children who suddenly become dependents.

C Hamm
5 years ago

Betcha Rusty’s a Democrat!

Painful truth
5 years ago

Only way to “fix” this, I suspicion won’t be very popular. When SS was instituted everyone especially males, didn’t live nearly as long as they do today. Simply die off quicker, please. Start smoking again, turn off your air conditioners, eat more foods friend in good old fashioned lard, no more heart transplants or cancer treatments. See that wasn’t hard now was it.

Painful truth
5 years ago
Reply to  Painful truth

That’s “fried” or course, no way to edit here after a typo.

PaulE
5 years ago
Reply to  Painful truth

To restore the real progressive intent of SS, which was always to collect far more money for the federal government than would ever be paid out, politicians could simply raise the age for which benefits could be collected to the median mortality age (65 in 1933, approximately 84 today). Thus the original model of 100 percent of the working population would be paying the tax, but only 50 percent of so-called retirees would live long enough to collect. Even for those that collect, they would only do so for, at best, a few months or years. Thus the original intent of FDR’s progressive (socialist) program would be fully restored. Just as onerous as your solution to restore the system via lowering life spans through bad diet and far less medical care , but more honest to how SS was intended to function.

Jim
5 years ago

Rusty, you are wrong. The correct answer to the question “How much money has been taken out of Social Security by presidents? ” is “All of it!”. Then they spent all of it, plus another $17 trillion of borrowed money. And when/if they pay it back, the source of the repayment will be money they print or borrow from someone else.

Robert Koehler
5 years ago

There is NO social security trust fund. This is a scam for Roosevelt to fund his dumb ideas to get the USA out of the depression. It did not work. The whole thing is a tax program called the Social Security Trust Fund.

PaulE
5 years ago
Reply to  Robert Koehler

Yep. There never was any so-called trust fund. Pure invention by the politicians. That’s why FDR and the Dems set the age of starting to draw benefits back in the 30’s at age 65 back then. That was the median age of mortality back then. So while everyone paid the tax, only 50 percent at best would ever live long enough to collect and then only for a few short years. The excess revenue collected would of course stay in the government’s hands until other Progressive Dems, under LBJ, formally passed legislation allowing them free access to this pile of excess tax revenue. Now of course most of the excess tax collected over those decades has been largely spent on a whole host of things. That’s usually how most socialistic programs play out over time.

Mark
5 years ago

So Social Security can be spent by the government taking a loan on it. Then, when SS needs the money, they call on Congress to pay it back. Then, Congress takes Tax revenue from the same people who are paying into SS to pay back the money plus interest. Or they just spin off a few Billion Dollars of fresh crisp fiat cash. So I pay into SS, then I get taxed to pay back into SS the money Government pisses away. Then Congressmen campaign for reelection telling us to look at all the wonderful stuff they gave us. This seems like a parlor magic trick to me. Nothing up my sleeve. Look I have your wallet, your watch, car keys…

PaulE
5 years ago
Reply to  Mark

You have essentially got it.

Jack
5 years ago
Reply to  Mark

Don’t forget, each time they “spin off a few billion dollars” they de-value all U.S. currency, therefore, robbing us all yet one more time. Our Founding Father’s would be so ashamed of what we have allowed this once great country to become. They warned us way back then but greed and power won out….just like they predicted.

Don
5 years ago

My problem is who to believe. I believe it is mostly a political football brought into play at election time. There are a lot of scare tactics going on. There are questions almost never asked like “what happens to the money paid in by those who die before they can retire?” Why can a widow only have the higher of the two’s benefit?” Those monies are then available for those eligible. But the shortfall is stated in such a way as if no one is dying and going off the rolls. Also what about overhead? Cut the fat ! I see new facilities being built and wonder where that money comes from. I visit the local facility and notice the security guard and wonder if this is a high security area. By the way, there is no money, checks or debit cards kept there. The local police are just minutes away in case someone gets rowdy just like any other business. Much can be done online and there is no need to go to the facility. Is there a financial statement that can be examined publicly so that we can see the operating expenditures? No one talks about these questions. But we do continue to hear how it’s running out of money! I hope Trump will use his business experience and put it on sound footing and do it without risking the money in so called “high yield” investing which can bankrupt it when the investments tank. Thanks for the article and maybe these questions can be explored and explained also.

Maria Rose
5 years ago

Thanks Rusty for that clarification on the Trust Fund. But I have a further question as the problem in investing returns also effects pensions funds. Doesn’t the fund have to guarantee a certain level of Funds be available to cover benefits?
Reason I ask this, is that I see how overextended investments deplete funds–I equate it to betting on horses–Sometimes that sure bet doesn’t come in and you lost the bet. I would think investors for funds like Social Security and pensions would be extremely careful in these investments and not use major amounts of fund to invest in high risk investments. I have a 401K which I started many years ago at one job and kept the funds there after I left job since account was in my name. Since I will be forced by law to take money out after 70 1/2, I have contacted and spoken with the company who does the investments and told them, I want no losses by high risk investment for the remaining years left before I take required distribution.
This is what I presume Social Security Funds and pension funds are supposed to do, because they do have an actuary of ages of contributors. There should have been no panicking because of the size of the numbers in the Baby Boomer group as they knew when we would be claiming benefits just by corrective planning. (70 years) And this planning needs to be part of the budget—-So Rusty—How does the government plan out Social Security Trust Fund payments?

PaulE
5 years ago
Reply to  Maria Rose

Social Security is “a promise to pay”. Social Security has no obligation to actually pay as was already decided twice by the Supreme Court. The federal government can change pretty much anything within Social Security as it sees fit and they have already stated changes would potentially have to occur starting in 2033, if all existing metrics (taxes, number of contributors, estimated number of people drawing benefits, etc.) stays the same.

Jerry E Ryan
5 years ago

Amac: Please keep in mind, we already have AARP. We don’t need another Socialist Association. Stay on the right side of the issues.

Mark
5 years ago

I understand that the ledger says Social Security has a lotta money. But where is that money, really? Invested in government bonds, by law, as stated. So, what happens when SS needs money to pay what it “owes”? The Treasury has to come up with the money, but how? Had the money been invested in something that actually returned something (that is, in the private sector) we would be fine. Even if the government weren’t running huge deficits every year, we might be OK. But the reality is that if SS needs money, the government will either have to raise taxes — a lot — or reduce benefits quite a bit.

So, in spite of what the ledger and apologists for the system claim, by any reasonable interpretation, Social Security is . . . broke.

Missie
5 years ago

You left out the part about the DI not being part of the original plan and how it has really sucked a lot of benefits out of the original funds.

R Nardi
5 years ago
Reply to  Missie

Please someone tell me why when I watch the handicap parking no matter where I am most of them are are driving newer cars, hanging their blue tags in the window and SPRINTING for the door? I never understood why DI and illegals get SSI benefits.

Painful truth
5 years ago
Reply to  R Nardi

Because Socialist Democrats need their votes.

Jerome Layne
5 years ago

I cannot agree with Rusty’s analysis. Whenever there has been a surplus of SS contributions Congress has invented ways to spend it – primarily through their ‘distribute the wealth’ thinking aimed at gaining political favor. As the old saying goes ‘Money burns holes in their pockets’ or maybe that should be ‘lines their pockets’. I know my personal and employer contributions, had they been invested at market rates, would have yielded several times more than the benefits I will likely receive. This is why I have always favored the ‘lockbox’ concept, making those ‘invested’ personal contributions my own.

Jim DeBorde
5 years ago

And you think the congress and presidents aren’t robbing SS . I have beachfront property in The Sahara for you . These bonds were never intended to be redeemed and based on our current national debt are worthless . Politicians are very bad managers of the purse and will if left alone bankrupt any and all systems .

Don Ackermann
5 years ago

Note: O’Neil versus the U.S. Government, 1951, Pennsylvania Supreme Court: Social Security was referred to as Old Age Insurance by the Roosevelt Administration to get the people to approve it. Since it was Old Age Insurance, O’Neil sued to force the government to keep that money in a separate trust fund and to be used only for S.S. Oh no, said the government, it’s just another tax to be used as we choose and won on that basis. This proves to me they just wanted to get their hands on a lot more money and used Old Age Insurance as a subterfuge to get it. What do we have in place of a solvent trust? A bunch of IOUs that will never be paid back. Ditto for Obama Care.

Hank
5 years ago
Reply to  Don Ackermann

Succinctly put, Mr. Ackermann. The government will finance repayment of the debt with new debt [Bad loans]. This dilutes the currency [inflation]. This is NOT capitalism. Capitalism repays debt from profit [productivity]. What we have here is economic suicide at an exponential rate. That’s why it took 224 years to amass a debt of $5 trillion. only 8 years [Bush] to double it, and then another 8 years [Obama] to quadruple it. The Federal Government is not a for-profit institution, and should not be allowed to go into debt.

Phil Bronner
5 years ago

Social Security is best described as a Ponzi Scheme. As the # of people drawing SS grows, the # of people paying into it is getting fewer. People are under the mistaken belief that the TAX they paid is “their money”. Try to withdraw it, lump sum. It is not a sustainable program, and is not, actually a Constitutionally authorized power given to either the Executive, or the Legislative branch.

Richard Keyser
5 years ago

Since when does Washington abide by laws? They don’t seem to want to enforce any. Trump is trying to change that.

W R
5 years ago

An easy fix to this issue would be to eliminate the cap on income upon which Social Security tax is paid. Currently the cap is $118,500 (2016).

Phil Bronner
5 years ago
Reply to  W R

An easy fix would be to ELIMINATE it, and return that %age of tax to the individual to be placed in whatever retirement plan they so choose.

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