The Shocking Truth About Social Security’s $2.83 Trillion Reserve

Many Americans rely on Social Security, a program that supports over 70 million people and is the largest federal government expense. Concerns about its financial future often include claims that Social Security funds are being “raided” by Congress and presidents. But is this true? Let’s break it down.

Understanding the Basics of Social Security Funding

Social Security is primarily funded by payroll taxes. Workers and their employers each pay 6.2% of wages up to a certain limit, which is $176,100 in 2025. Self-employed workers pay the entire 12.4%. Additionally, about 40% of Social Security beneficiaries pay taxes on their benefits, which contributes more revenue to the program.

Another source of income is interest from investments. When Social Security collects more money than it pays out, the surplus is invested in U.S. Treasury bonds, which generate interest. For example, in 2022, these investments earned $66.4 billion, about 5.4% of the program’s total income.

The Myth of “Raiding” Social Security

The idea that Social Security is being raided stems from the government borrowing money from its trust funds. By law, surplus funds are invested in government bonds, which means the money goes into the U.S. Treasury’s general fund. This borrowed money is used to fund other programs, but it must be repaid with interest. As of May 2023, the trust funds held $2.83 trillion in these bonds.

The Committee For a Responsible Federal Budget (CRFB) explains that borrowing from the trust funds is expected and accounted for in long-term projections. It’s not the primary reason for Social Security’s financial challenges.

Why Social Security Is Facing Financial Problems

The real issue is demographic changes. Fewer workers are paying into the system, while more retirees are drawing benefits. This imbalance is caused by declining birth rates and longer life expectancies. As a result, Social Security has been operating at a deficit, dipping into its trust funds to cover payments.

There are two trust funds in the system:

1. Old-Age and Survivors Insurance (OASI) Trust Fund: Funds retirement benefits and is expected to pay full benefits until 2033.
2. Disability Insurance (DI) Trust Fund: Covers disability benefits and can fully pay benefits until 2098.

Combining these funds could allow full payments until 2035. However, if no changes are made, the trust funds will be depleted, and only 83% of promised benefits will be payable.

What’s Next for Social Security?

While lawmakers are likely to address the shortfall, potential solutions remain unclear. Options could include increasing payroll taxes, raising the taxable wage cap, or adjusting benefit formulas.

The future of Social Security is crucial for millions of Americans, and decisions made in the coming years will determine its stability for future generations.

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