Question

Describe the Social Security trust fund and how much it does or doesn’t resemble a fund one might find in a private retirement system.

Answer 1

Social security trust fund is the federal government sponsored fund that is managed and administered by the government agency named as United States social security administration. It is a fund that collects payroll tax and other social security taxes to provide social security benefits. This is a unique fund that not only offers social security in the post retirement time, but also it gives survivor benefits and disability insurance as well. So, this fund is of the nature of insurance fund.  The social security trust fund is similar to the other private retirement system, because it also offers benefits after the retirement and it makes investments in government guaranteed treasury securities. A person involving in private retirement system also gets post retirement benefits.  But, the social security trust fund is different from the private retirement system, as social security trust has no marketable assets, unlike the private retirement system and it has a wide range of benefits such as disability benefits and survivor benefits other than the old age benefits, that are either not covered or partially covered by the private retirement system. Further, private retirement system collects payment on a regular basis from the members so that these members can avail the benefits. But, social security trust fund works on social security and payroll tax that has the motive to provide public welfare, unlike the private plans who want to earn profit as well.