The Social Security Trust Fund

Social Security Is Not ‘Funded’
Social Security depends upon payroll taxes collected from the working generation. Without that support, the Trust Fund would be gone in about 3 years. What you pay in payroll taxes today, is spent today. Your benefits depend upon the next generation paying into the system based on the same deal. Anything that makes Social Security less appealing to the next generation will hurt the system.

The Trust Fund Holds Real Assets – But They Are Very Limited
The Social Security Trust Fund holds excess payroll taxes. These funds are taxes that have been collected, but not yet disbursed. The money is invested in securities backed by the full, faith, and credit of the United States government. The Trust Fund holds roughly 2.5 trillion dollars. User Challenge

While that may sound like a lot of money, it is very small compared to the outgo of the system. Without payroll taxes to augment the Trust Fund, Social Security would be insolvent in about 3 years.

2033 Is Really A Guess – Probably A Bad One
Washington projects that the Social Security Trust Fund will enable the system to pay full benefits through 2036. In 2008, Washington also projected that Fannie and Freddie were safe. They were completely wiped-out just weeks later. They told us that housing was fixed and the banks were well capitalized. It is all a guess. The real question is can you afford for Washington to be wrong again?

Basically, the estimates for the Social Security Trust Fund are only as good as the assumptions. It is our opinion that the estimate is a bad guess because they are using unrealistic assumptions. While Ultimate Real Interest or Wage Growth, may sound fancy, the numbers used by the Trustees are simply inconsistent with reality.