Observations on life

How do we get our money back from the Social Security Trust Fund?

Before 2010 Social Security payroll taxes exceeded the amount needed to pay benefits. That surplus (which no longer exists) was invested in special US Treasury Bonds. Those bonds pay the Trust interest. The current incoming payroll taxes PLUS a portion of the interest payments are now used to pay benefits.

THE PROBLEM IS that in a few years the combination of interest and taxes will not cover the benefit payments and the BONDS WILL HAVE TO BE REDEEMED. Then what happens? The explanation from OMB several years ago is shown below. Nothing has changed since.

The Clinton Administration’s Office of Management and Budget explained this back in 2001:

These balances are available to finance future benefit payments and other trust fund expenditures–but only in a bookkeeping sense…. They do not consist of real economic assets that can be drawn down in the future to fund benefits. Instead, they are claims on the Treasury, that, when redeemed, will have to be financed by raising taxes, borrowing from the public, or reducing benefits or other expenditures.

Just keep in mind when you hear politicians or special interest groups talk about the Social Security surplus, there is no such thing. The $2.9 trillion in the Trust is not a surplus, it is fully committed to pay benefits. The interest payments are not a surplus they are used to pay current benefits and will fully disappear in only sixteen years … as will the $2.9 trillion.

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4 replies »

    • Nope…. Social security is a pay as you go system (Ponzi scheme). Your money was collected and spent by somebody who entered the system before you. The money you are collecting now is paid in by somebody behind you in the pecking order. Of course you can view your benefits as YOUR money if you believe government’s promise to pay, a promise that can be broken unilaterally. The longer congress goes without remedying social security the more likely it is that people approaching decision time about whether to take social security early will be pushed to collect as soon as possible before the trough starts to run dry.

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      • I think of it like a bank. I put my money in…
        but that specific money is long gone by the
        time I withdraw money from my bank account…
        As I inferred, I am withdrawing money now
        that I paid into Social Security for 40 years
        [and like a bank I expect to collect interest.]

        .

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      • You aren’t collecting much interest, but if you are typical, you get back all you and your employer paid in taxes in less than 8 years after starting to collect. And don’t forget there is a lot more to SS than your own retirement benefits.

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