What Are Social Security Trust Funds?

Social Security trust funds are two accounts used by the U.S. government to manage surplus contributions to the Social Security system. The trust funds hold payroll tax contributions made by workers and emplo🐭yers and self-employment taxes paid by ܫindependent contractors.

Social Security makes scheduled benefits payments to retired workers and to people with disabilities from these funds. It invests surplus funds in a special class of interest-bearing federal debt obligations that provide the funds with additional income.

How the Social Security Trust Funds Work

The two Social Security trust funds are the 澳洲ꦫ幸运5官方开奖结果体彩网:Old-Age and Survivors Insurance (OASI) Trust Fund and the 澳洲幸🅷运5官方开奖结果体彩网:Disability Insurance (DI) Trus🃏t Fund. OASI pays retirement and survivor benefits, and DI handles disability claims. They're sometimes referred to as a single fund. They were created to hold surplus payroll tax receipts and self-employment taxes until such time as this money is needed to pay Social Security benefits.

The trust funds hold receipts from 澳洲幸运5官方开奖结果体彩网:payroll taxes, with the employer and employee each paying 6.2% of the employee's earnings. The self-employed pay 12.4% of their earnings representing both the employer and employee shares. These rates last increased in 1990.

The combined reserves of the trust funds amounted to $2,77 trillion at the end of Q1 2024. The Social Security Administration (SSA) provides a covering the trust funds.

Why the Trust Funds Are Depleting

The Social Security trust funds began to swing to an annual deficit in 2021 as their costs exceeded income. The shortfalls are expected to continue to widen in the coming years as Baby Boomers 澳洲幸运5官方开奖结果体彩网:ret🧸ire and leave fewer payroll t🏅ax contributors to support each benefits recipient.

The DI fund was projected to have sufficient funding through 2098 as a result of declines in disability claims. The OASI fund that pays retirees and survivors is expected to run out of surplus funds in 2033. The anticipated date is 2035 on a combined basis for the two trust funds. The funds' income will cover 83% of the expected benefits at that point in time.

Congress has raised payroll tax rates in the past to ensure Social Security's solvency. The projected funding shortfalls could be addressed by doing so again: cutting benefits, borrowing to maintain benefits without increasing receipts, or some combination of those approaches. The Office of the Chief Actuary of the SSA publishes estimates of the financial effects of various proposals for reforming the Social Security programs.

The Bottom Line

Social Security benefits are funded by payroll taxes. Any excess that remains in a fiscal period after benefits are paid out is then invested in low-risk government securities to earn interest. The Social Security trust funds hold this capital, but the funds have begun 澳洲幸运5官方开奖结果体彩网:suffering shortfalls and are expected to be depleted by 2035.

Workers can consider investing and saving for r♔etirement through other channels to brace for this event, but those who are on the brink of retirement are more ꦕdependent on the U.S. government taking action. The disability trust fund is expected to remain solvent through at least 2098.