Question

Pertaining to the social security trust fund: is it solvent, growing, how are funds invested.

Answer 1

Few budgetary concepts create as much unintended confusion and deliberate misinformation as the confidence funds of the Social Security. Despite being described by some as "worthless IOUs," Social Security trust funds are invested in Treasury securities that are as sound as any other U.S. government securities held by investors around the world and considered one of the safest investments in the world. Beginning in 2021, Social Security will begin drawing down reserves from trust funds to help pay for benefits.

While social security has a long-term financial shortfall that needs to be closed, the combined trust funds of the program will not be depleted until around 2035, giving policymakers time to develop a carefully crafted funding plan.Social Security is essentially a "pay as you go" scheme, ensuring the benefits of today are mainly provided by the payroll taxes received by existing employees. However, Social Security collected more in payroll taxes and other income than it paid in benefits and other expenses for over three decades, and the Treasury invested the surplus in interest-bearing Treasury securities, ultimately reaching a total of nearly $2.9 trillion in reserves from trust funds.

If the trust funds of Social Security run out of Treasury bonds to cash in, then benefits would not stop, contrary to a common misunderstanding. By that point, if nothing more were achieved, Social Security will still use its annual tax revenue to cover 79 per cent of the promised benefits. Of course, it is not an acceptable way to run this vital program to pay less than full benefits, and Congress will need to act to strengthen its long-term finances.

The Trust Fund for Social Security is invested solely in the U.S. Securities from the trusts. Like the Treasury bills, notes , and bonds purchased by private investors around the world, the US government's full faith and credit supports the Treasury securities held by the trust funds. The U.S. government has never defaulted on its obligations, and investors regard U.S. securities as one of the safest investments in the world.