Is misleading about the state of Social Security intentional or out of ignorance?

Proponents of expanding Social Security benefits frequently throw around the word “surplus.” Some even claim there is plenty of money in the Trust to expand benefits now. This creates a false impression regarding Social Security finances.

Let’s be sure we understand “surplus.”

A surplus is simply more than you need to meet your obligations. In the case of Social Security, government has taken Working Americans taxes and “promised” a future benefit. It doesn’t matter if you are 90 or 19, you have earned or are earning a benefit. At some point the government must pay you.

Remember, incoming taxes are no longer sufficient to make even current SS benefit payments. Incoming taxes plus interest from the trust are no longer sufficient so, taxes, interest and each month some of the trust assets are used to pay current beneficiaries.

Although there are major differences between pensions and SS, the concept of a fund surplus is similar. You must have more money than needed to meet all the obligations created. In other words, if from today forward no money was added to the fund, every participant would eventually collect what they are entitled to from what is in the fund with money left over.

An overfunded pension plan is a company retirement plan that has more assets than liabilities. In other words, there is a surplus amount of money needed to cover current and future retirements. Although the surplus can legally be recorded as company income, it cannot be paid out to corporation shareholders like other income as it is reserved for current and future retirees. Source: Investopedia

If all payroll taxes and other revenue into the Social Security Trust were stopped today, benefits in pay status could be paid for about 36 months. There is nothing close to a surplus.


  1. JRATT, you are absolutely right. I can’t find my source for the average payout. I think I took the maximum payout number instead. However my point still stands and that is, in 1950 there were 16.5 workers paying into social security for every one getting a benefit check. By 2030 it is predicted to be only 2 workers paying into the system for every benefit check. Using your number of $25,390.92 per year, each average worker and his employer would have to pay $6347.50 in social security taxes (or almost double) to keep it afloat under the present system or 4 sets of tax collection for every check paid. That is a far cry of 33 tax bills for each check.

    I still fail to see how there is a “surplus”. I see only money set aside to pay future benefits and not enough and you agree that the fund will be short by 2035.

    I have money in the bank to pay my quarterly property taxes. The money is “invested” in a safe account earning 2.25%. I do not look at that money as “surplus”. I do not take that money and use it for a trip to Europe because it is not extra or surplus money. It is there to pay a future bill, my property taxes. This goes true for the Social Security Fund. It is there to pay a future bill and it is already known that it cannot pay 100% past 2035, therefore there is no extra or surplus money. If there was surplus money, then they should be cutting our social security payroll taxes.


    1. D.G. – You missed my point, it does not matter how many employees it takes to pay benefits, as long as they are paid. Workers today, will get their Social Security benefits when they retire.

      With just a small increase in the FICA tax all benefits can be paid.
      Employers pay half of that tax. If you just raised the tax on what the employers pay, since they just received the largest tax cut in history and many no longer provide any retirement benefits to employees, the worker sees no tax increase and Social Security payments will continue for years to come, if Congress acts now – the minor funding problem is fixed.

      We have other more important problems that the government needs to fix in the budget, Social Security is a minor one. Higher and higher defense budgets, welfare program funding, and wasted tax dollars on grants, foreign aid, and the interest on the debt.

      In 1995 the DoD budget was $485 Billion, adjusted for inflation. Today the DoD budget is $717 Billion, that is crazy. We have to cut the federal budget, stop adding to the debt and start paying it off. If we do not make budget changes now, our problems in 2035 and beyond will not be just a Social Security shortage.

      If the U.S. government continues using tax dollars incorrectly and going to the FED and borrowing more and more money, we are all going to see our standard of living go down, way down.

      Also, Social Security is not an unfunded pension or Ponzi scheme. If it was a Ponzi scheme people would not be getting paid benefits and there would not be debt bonds in the trust fund to pay 100% of benefits through 2034. It is a welfare program for citizens who qualify for disability, survivor, spousal and old age benefits. It is funded by taxes on current workers, as it has always been funded.


  2. The Social Security fund is structured as a unfunded pension or pay as you go fund by law. If this was a stock market investment fund it would be referred to as a Ponzi scheme which is illegal. But governments around the world are permitted to structure pensions like this. Its survival depends on early investors (retirees) being paid off by new investors (people still working). It theory, Social Security does not have to have any reserve or that misused word “surplus” funds. They can simply raise the payroll tax for everybody working each year to pay for the COLA until each worker is paying more in taxes and takes no money home. But it makes sense when there are more people working that the government should save some of these taxes for future liabilities for when there are less workers to retirees ratio which there currently is. When the fund was first set up, nobody planned on increasing the payout nor when they did expanded the payouts, the income stream was never properly adjusted.

    Today there are 2.9 workers for every retiree*. By 2030, the ratio is expected to be 2:1. The average social security benefits is $33,456. The average US wage is $51,939. With 2.9 workers paying into the fund and their employers paying their part of the tax on that average wage, the fund is only collecting $18,677 or just about 55.6% per year, on average. The average worker only pays $3220 in social security taxes now. If in 2030 when the ratio drops 2:1, the workers and employers would each have to pay $8364 a year just to pay one average retiree their benefit. That works out to be $2.47 per hour more in wages given directly to fund social security.

    Conventional pension funds are required to be funded to 80% of future liabilities or in other words, actually have 80% deposited that is not to be used for anything other than paying pensions. These funds in theory do not require any additional deposits to pay the retirees if properly managed.

    The elephant in the room that nobody is talking about is state and local government pensions. Only 11 states are funded to 80% or better. In New Jersey, the state pensions are funded only to 30.9% of the liabilities. There is no way people in these states can be taxed into making the pension payments which means one day their pensions will have to be cut and civil discord will happen from the pensioners and the taxpayers.

    People have such a poor understanding of how government works and spends their taxes. They also have such a poor understanding of their personal finances and as proof I point to the high debt load and the housing crisis. People like to believe what they want to hear. The are told that they are entitled and that only 1% should pay. So why would they not believe that there is a surplus?

    * 2.9:1 is a 2010 ratio. Also the 2030 ratio was an estimate from 2010.
    In 1950 the ratio was 16.5:1.


    1. D.G. – Your numbers on Social Security are off quite a bit.

      According to the 2018 average retiree benefit per month is $!,374.45 = $16,493.40. Average Spousal benefit per month is $741.46 = $8897.52, for a total family average of $25,390.92 per year.

      Because I have other retirement income and retired at age 50, my wife and I decided to start Social Security in March of 2018. My 2019 Social benefit per month is $896 per month = $10,572, my wife’s 2019 Social Security spousal benefit per month is $428 = $5,136, total family benefit = $15,888 per year.

      My 88 year old mother receives a Social Security spousal benefit of $750 per month = $9,000 per year. The one thing you have to remember that many who are getting benefits today started working in the late 1940s through 1970s at $.50 to $3 per hour.

      By the way there is a surplus, although it is debt bonds from extra FICA taxes collected over the past 75 years, and it will all be spent by 2034, maybe earlier. That is how the system was set up and it has worked just fine since 1939, when they first started paying benefits. In 2035 Social Security taxes collected each year in 2035 on will only be able to pay 76 % of benefits. If Congress just raises the FICA tax 3% slowly over the next 15 years there will be no shortage. Or just adjust benefit COLAs over the next 15 years to balance the system.

      So the Social Security system works and can be adjusted to continue to pay retirement benefits for the next 75 years and beyond.


      1. You have it mixed up. There is a reserve, there is no surplus. The accumulated benefit for every working and retired American far exceeds the trust and thus there is no surplus. The higher tax to keep the program solvent for 75 years is about 2.78% of the covered payroll. Not that big of a deal as you said. By definition the program could be considered a Ponzi scheme in that to pay benefits there must be a steady flow of incoming payments (taxes) that today are 100% used immediately to pay those benefits.


      2. I did not say there was a surplus that would pay benefits past 2034, or that we could or should raise benefits above current levels. OK, so it is a reserve. I said with a small tax increase future payment can be met. What about all the other problems with government spending. They are way more screwed up than the funding for Social Security. You assume way to much about comments made on your site. You think Social Security is not a welfare program. It is because no one has paid for the benefits that they will receive if the get benefits for more than 10 years. Not mixed up at all. Even if Congress does nothing 76 % of future benefits will be paid. And low income retirees will qualify for other welfare benefits, as allowed now..


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