Q & A
Where does Social Security money come from?
Answer: The Social Security Administration has three basic sources of income: payroll taxes, federal income taxes on a small portion of SSA benefits and interest paid to the SSA trust funds. Quoting from the Financing section of the recently published Fast Facts & Figures About Social Security, 2013: “Social Security is largely a pay-as-you-go program. Most of the payroll taxes collected from today’s workers are used to pay benefits to today’s recipients. In 2012, the Old-Age and Survivors Insurance and Disability Insurance Trust Funds collected $840.2 billion in revenues. Of that amount, 83.8% was from payroll tax contributions and reimbursements from the General Fund of the Treasury and 3.2% was from income taxes on Social Security benefits. Interest earned on the government bonds held by the trust funds provided the remaining 13.0% of income. Assets increased in 2012 because total income exceeded expenditures for benefit payments and administrative expenses.” Read more.
Source: socialsecurityinfo.areavoices.com – September 12, 2013
Notice: The links provided above connect readers to the full text of the posted question and its response. The URL (internet address) for these link are valid on the posted date; socialsecurityreport.org cannot guarantee the duration of the link’s validity. Also, the opinions expressed in these postings are the viewpoints of the original source and are not explicitly endorsed by AMAC, Inc. or socialsecurityreport.org.
SS collected through payroll tax should 100% pay for SS checks to retirees. The monies should never be used for anything else.
David:
Thanks for the comment. We agree completely with your statement. Our Social Security Advisory Service has responded to many questions about this and I can offer the following recap of how Social Security funding takes place. When workers and employers pay FICA tax, the funds withheld via their payroll systems are forwarded to the U.S. Treasury, where they are immediately (by law) converted into special interest Treasury bonds. The actual cash, of course, goes in the U.S. general treasury. The special interest bonds are forwarded to, and held by, Social Security awaiting redemption to pay scheduled benefits. This happens throughout the month as benefits become due. Through the years and up to 2021, the Social Security program’s revenue has exceeded the cost of the program’s operating costs (benefits and administrative costs), leading to an accumulation of reserves (in the form of bonds) in the program. This reserve accumulation had reached nearly $3 trillion by the end of 2020. The details associated with the bonds held in reserve are auditable and reported annually to Congress via the Social Security Trustees Reports. Our staff has tracked the movement of these fund from 1940 (the first Trustees Report) to present and have concluded that the accounting is intact.
Thanks again for the comment and for taking the time to contact us.
Gerry Hafer
AMAC Foundation Social Security Advisory Service
CONFIDENTIALITY NOTICE: The opinions and interpretations expressed in this message are the viewpoints of the message’s author, a trained advisor accredited under the National Social Security Advisors program of the National Social Security Association, LLC (NSSA). The author, the NSSA, and the AMAC Foundation are not affiliated with or endorsed by the United States Government, the Social Security Administration, or any other state government.