I have been writing about Social Security for nearly 10 years and have, over that time, personally answered thousands of questions from those seeking guidance with their Social Security options. Most of the questions I receive are about personal benefit options (when to claim Social Security and questions about spousal/survivor benefits are the most common).  But one theme which seems to regularly present itself in the form of a question is whether politicians have “stolen” Social Security’s money, or a variation thereof – when will the government repay all the money they have used (squandered) for some other (usually nefarious) purpose?  Let me set the record straight for once and for all …. No Social Security money has ever been stolen by the Federal Government, nor have those funds been used for any purpose other than Social Security!

When I relate that fact to those who ask, I’m sometimes accused of being a “government shill” – working surreptitiously for the federal government (not true). Some have flatly told me I am wrong, because they “were there” to personally witness the government chicanery. Among the usual accusations are:

  • President Kennedy used Social Security funds to start the Peace Corps.
  • President Johnson took Social Security funds to balance the federal budget
  • President Nixon used Social Security reserves to help fund the Viet Nam war

or some other similar variation, none of which are true!

Social Security Revenue

Fact is, the reserves in the Social Security Trust Funds totaled about $2.8 trillion as of the end of 2023[1], said reserves accumulated over the years when Social Security revenue was greater than Social Security’s cost.

Let’s examine the facts: Social Security receives its revenue from three sources:

  1. Payroll (FICA/SECA) taxes from those working (90%)
  2. Income tax on Social Security benefits paid (3.8%)
  3. Interest on the reserves held in the SS Trust Fund (5.4%)

Social Security revenue from payroll taxes and from taxation of Social Security benefits is received by the U.S. General Treasury and immediately invested in “special issue government bonds” which are held in the Social Security Trust Fund. Those special issue bonds pay interest to the Trust Funds, which further enhances the Trust Fund reserve balance. It’s important to note that these “special issue government bonds” are interest-bearing investment instruments backed by the “full faith and credit of the U.S. Government” – a designation deemed essentially risk free in financial circles.

Nevertheless, so-called pundits regularly claim that the reserves now held in the Social Security Trust Funds are “worthless IOUs.”  To those “pundits” I would ask that if the bonds in the Trust Fund are so worthless, how are they now being used to finance the current shortfall of Social Security revenue? And there is, indeed, a shortfall. In 2023, Social Security revenue was about $1.35 trillion, compared to Social Security’s cost of nearly $1.40 trillion – a deficit of about $500 billion.

Social Security’s Problem

Social Security revenue from payroll taxes on workers (FICA/SECA) has been insufficient to cover payments to beneficiaries since about 2010. Up to the year 2021, revenue from income tax on Social Security benefits and interest on the Trust Fund reserves, when added to revenue from payroll taxes, kept the Social Security program operating “in the black” (total revenue from all sources exceeded program costs). But beginning in 2021, total Social Security revenue was insufficient to cover program operating costs, and the special issue bonds in the Trust Fund were redeemed to pay benefit obligations to all those receiving Social Security. And that is how Social Security is operating today – bonds held in reserve in the Social Security Trust Funds are redeemed in order to pay 100% of benefits to all beneficiaries.

The problem, of course, is that as Trust Fund reserves are drawn down to pay full benefits, less interest is also being paid on the bonds held in reserve. At the same time, more and more beneficiaries (e.g., “baby boomers”) are retiring and collecting benefits, while life expectancy is continually increasing[2]. All of which leads the Trustees of Social Security (as well as the Congressional Budget Office) to predict that the reserves in the Social Security Trust Fund will likely be fully depleted in about 2034.  And since the Social Security Administration can, by law, only pay out what it has received in revenue, that could result in a benefit cut of about 21% to 23% for all beneficiaries.  That is, unless Congress acts to reform the Social Security program to make it, once again, financially solvent.

The Solution

Congress must develop a bipartisan reform package to restore Social Security to solvency soon.  Congress has known for decades that Social Security would need reform by the mid-2030s but have, thus far, neglected to enact serious program changes.  It is time to stop “kicking the can down the road” and work together to create a bipartisan Social Security solution.  For its part, the Association of Mature American Citizens (AMAC) has developed, over the past several years, a proposal to ensure that full Social Security benefits will be available to future generations.  AMAC’s proposed solution can be found at https://amac.us/social-security-guarantee/.

And, please, let’s stop the false narrative that Social Security money has been stolen or misused – it has not been. Every dollar ever contributed to Social Security has been used only for Social Security purposes.    

[1] Source:  2024 Report of the Trustees of Social Security & Medicare, which can be found at this link: https://socialsecurityreport.org/wp-content/uploads/2024/05/tr24summary.pdf

[2] Average life expectancy for someone of age to claim Social Security today is about mid-80s – men about 84, and women about 87. Thus many are now collecting SS benefits for decades.