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The amount of misinformation out there about Social Security is astounding and to me very disturbing. I put this fact sheet together. I hope you will share the next time you hear one of the outrageous claims being made.
The basic funding mechanism has remained essentially the same since Social Security began:
However, there have been some important changes over time:
1935 Social Security was created. Payroll taxes were credited to a government account, not yet a formal trust fund.
1939 The formal Social Security Trust Fund was established. Surplus funds continued to be invested in U.S. Treasury securities.
1960s–1980s The Trust Fund shifted from holding a mix of Treasury securities to primarily special-issue Treasury bonds.
1983 reforms Congress increased taxes, gradually raised the full retirement age, and made other changes to build up large Trust Fund reserves for the retirement of the Baby Boom generation.
A common misconception is that the Trust Fund money sits in a vault. It never has.
Since the beginning, surplus Social Security taxes have been invested in Treasury securities, and the Treasury has used those funds for general government operations while owing the Trust Fund repayment with interest. That investment structure has existed since the program’s early years and has not fundamentally changed.
In addition to payroll taxes and interest payments on Treasury bonds, income taxes paid on 50% of SS payment go into the Trust Fund.
One major difference today is that Social Security is now paying out more in benefits than it collects in payroll taxes, so the Trust Fund is being redeemed to help cover benefits.
In earlier decades, especially from the 1980s through the 2000s, the Trust Fund was growing because tax income exceeded benefit payments.
The Trust Fund has always been invested in U.S. Treasury securities and used in roughly the same way since the program’s early years, but Congress has periodically changed tax rates, benefits, retirement ages, and other rules.
And to cope with changing demographics of our population, Congress needs to make more changes to maintain solvency because after all Treasury bonds are redeemed, income taxes paid will be insufficient to pay full benefits which has been the case since 2021 when bonds started to be redeemed.
You should contact current Congress members that represent you. (Wait, that’s an oxymoron?) You should also concentrate your efforts on those running for Congress this year, especially the Senate. Those folks will be here for six years and coincidently, at a time when the SS fund is due to recalculate SS payments downward. Last I heard 22-28% lower payments to new and existing recipients.
I’ve written Chuck Schumer and Kirsten Gillibrand “Please fix Social Security” on 11 different occasions. ‘Thanks for sending me your ideas.’ is the most I’ve ever received.
In Jan, 2025,I suggested they consider the “Hoyer-Primus Report” from Stephen Goss, Social Security’s Chief Actuary. I got crickets.
I asked if they just preferred letting SS decline and ignore the welfare of seniors; more crickets.
I sarcastically suggested Chuck do a “Dodd-Frank” and take on ‘the third rail of politics’. Fix SS, then retire–more crickets.
I’ve stressed that delay makes the ‘fix’ more onerous. I’ve asked my family in FL, WA and WI write their congress-person requesting attention this problem. Only one even acknowledged my request.
It’s hard for me to imagine what it will take to find some combo of raising the earnings cap and some sort means test on benefits to fix SS. After all Bezos, Buffet, Gates and Trump types have _no_ need for a monthly check from Uncle Sugar. and still nothing but crickets…..
I write my reps as well, one is Democrat and one Republican; we need more people to do the same. But I now see a bill to create a commission to study the issue; oh boy!
Sounds alot like Don Quixote.
I was not aware of the fact Mr Quinn stated that 50% of my federal tax paid on my SS goes back to the trust fund. So as a newby with AI, (after all, I am old enough to collect SS) I posed that question to my Gemini AI. It confirmed that Mr Quinn is correct, and then added additional information that my taxes paid on the NEXT 35% of my SS go to the Medicare Trust Fund. The return of the first 50% was passed by Congress in 1983, and the next 35% to the Medicare Fund was passed in 1993.
Dick, great summary, but please look in your crystal ball and tell us what you think will happen when the trust fund is deleted. What this crazy do nothing congress will be able to do since they are so divided. I just started my benefits at 66 and 9 months. thanks!!
This Congress, this administration will do nothing, it’s ouside their ideology, but the next administration will come up with a probably temporary solution. Benefits won’t be cut.
Exactly right!
Thank R Quinn for the facts. My take for the future, is raise the age to 70, make a slight increase in % taken. If you wait until 75 you get the 8% gain per year. RMD is at 75. Everyone deserves their reasonable payout of Social Security. Enough said.
I don’t know if you thought about the people that do a lot of manual labor for their livelihood. Masons, plumbers, roofers and construction workers just to name a few. When you’ve worked with your hands and your back all your life your body’s just about wore out at 65.
OMG, Blue, I delivered beer for 30 years, and as a tax preparer, many of my clients were in the Trades. These workers are worn out and broken by 65.
I appreciate that people are living far longer than when SS was signed into law, but short of some type of tiered system that recognizes the brutal occupations, I don’t see a way to fairly raise the retirement ages.
We had unreduced early retirement at 55 with 30 years of service for just that reason. By 55 the physical worker’s bodies were worn out. We also had pretty liberal criteria for disability pensions even younger. That was a critical benefit for our unions.
Not many pensions like that any longer! Was there also a benefit to the company such as fewer workers comp claims and reduced health insurance costs?
Better safety, hopefully lower comp claims and some productivity and promotion opportunities for younger guys. No health care savings. We were self-insured and that coverage continued with them.
That’s my point Dan. I work for a municipality and the guys that used to throw cans as in garbage cans before there was automation,when they were made out of steel that weighed 35 to 40 lb before they were even full with garbage. I’m sure you could relate with kegs of beer.They had broken bodies at 50. They would have to retire early because of a broken body and lose a good portion of their pension due to early retirement. The union and municipality got together and modified age of retirement and years of service so that they could actually have a decent pension.
Thank you for your insight Dan
Couple of typo’s. In the first paragraph,
In the last paragraph,
Thanks, my fingers on the iPad go off sometimes
Really?
There was an earlier post about talk involving retirees to take Tradition IRA withdraws at a fixed 12% tax rate. Imagine the chunk of tax revenue that would come out of this. What if we threw that tax money into the Security Trust Fund? It’s a win – win for retirees with large TIRAs and SS.
So, the only people that will pay are folks that saved for retirement?
The 12% is far less than I pay and no doubt others. It may help the SS trust, but a revenue loss overall. Why not designate a portion of the current income taxes on RMD to the trust?
Same reason. It’s not found money. That would make the deficit larger. Granted, a SS fund solution is sorely needed soon.
Well, you could but that just moves existing money around which, in total, is already way less than needed. We flat out need to raise more money for Social Security. A combination of three things would help a lot: 1. raise the FICA tax. 2. Raise covered compensation for tax purposes (like Medicare). 3.Introduce means testing for the very high income fokls receiving Social Security who really don’t need it.
Frankly, there are all sorts of things that can be done/negotiated to help. Just heard that they have moved up the timing on the depletion of the trust fund. I think the American people would support shoring up Soc Sec and it’s disgusting our polticians don’t even talk about it.
Means testing is a slippery slope and a bad idea in my opinion. It changes the entire concept of the program. Besides the really high income don’t even take what they are entitled to and in some cases don’t even earn benefits.
RQ,
I don’t doubt what you state about high earners here. Do you have “don’t take” and “don’t earn” stats … just curious on the percentages. Thanks.
Not precisely, but for example Buffets salary remained $100,000 for years. That would be the basis for any SS benefit. The claims that billionaires don’t pay income taxes would mean they don’t have earned income so no SS benefits either. No clear data is released, but some sources claim their accountants claim it and then it’s given to charity.
Thanks.
There’s already an element of means testing in the program vis a vis how SS is taxed. And , as to Medicare, same thing for IRMAA. I’m not sure about your comment the rich aren’t taking it. Have you actually seen any stats on how many?And, I’m not talking about just billionaires. Anyone making, say $250,000, in retirement really doesn’t need SS or at least all of it. As to not earning it, how does that happen? At some point, the very wealthy don’t earn it in the sense of their pay no longer includes wages for FICA but on the way up they were certainly drawing a wage subject to FICA. FDR’s original program was not meant to be a welfare program but times change over the years and I believe too many of our safety net programs go to people that aren’t really that bad off….thus these programs are all eating money we don’t have. Once the trust fund runs out don’t be surprised when congress makes up the shortfall with general revenue which, in effect, then makes it a welfare program anyway.
I don’t see income taxes or IRMAA as means testing as the basic benefits are in tact. What you describe is adjusted cost sharing in my view.
What do you consider very high income? The super rich?
I think that’s worth a discussion but, truthfully, if one has income of say $250,000 seems like some gradual phase out could start at that point. I don’t like “cliffs” but gradual could work. For the record I don’t like taxes but Social Security is so important to this country we have to agree to do what is necessary to save it. I write my congressman regularly to get off his butt and fix it.
Chris and Steve, I think you are right on all counts. I have just one thought to add. While I’m not volunteering to pay more tax, but considering that I worked the final 30 years of my career (1990-2020) without seeing any increase in my payroll tax, I wouldn’t object to paying tax on more of my SS benefit, provided that the tax continued to shore up the trust fund. It doesn’t seem fair to put the entire burden on folks still working.
Agree, Dan. I’m willing to step up, too.
Per AI: Polls show 71% to 85% of Americans prefer raising taxes to cutting benefits. However, agreement drops sharply to just 23% when asked if they would personally pay higher taxes to close the shortfall.
I teed it up for you Richard. Take out your driver and give it a wack😂
Why not raise the SS contribution level from $184,500 the way it is for Medicare? Remove the income limits
As long as you also increase the SS payments to those that pay those taxes, then sure. But, if the whole point is to get more revenue with no benefit for it paid, then it’s wrong.
Exactly, I think this is way more fair than means testing.
Great point. I wonder what the projections would show if the cap was eliminated.
Social Security remains insolvent. The trust funds will run out in 2051 at which point all beneficiaries will face a sudden 11% benefit cut. Source: CRFB calculator
If you don’t give any benefit credit for the extra earnings taxed you get five more years. Only 6% of Americans earn above the wage cap.
According to the analysis in the Trustees of the Social Security and Medicare trust funds report dated June 9, 2026:
“The projected long-term finances of the combined OASDI fund worsened this year primarily due to three factors. First, the assumed ultimate total fertility rate was lowered from 1.90 children per woman to 1.75 children per woman. Second, estimated historical and assumed near-term and ultimate net total immigration are lower this year. These two demographic changes lowered the projected number of workers, projected taxable payroll, and projected GDP over the long range. Third, the One Big Beautiful Bill Act (OBBBA), as enacted on July 4, 2025, makes permanent the lower ordinary income tax rates and adjusted tax brackets originally passed under the 2017 Tax Cuts and Jobs Act and both increases and makes permanent the larger standard deduction of the 2017 Act. The OBBBA also adds a temporary additional standard deduction for taxpayers over age 65. As a result of these provisions, the OASI and DI Trust Funds will receive lower levels of revenue in the future from income taxation of Social Security benefits.”
The CRFB calculator mentioned in the comments doesn’t allow “what ifs” that would require new legislation be passed, and would be unpopular with the current administration. It is more focused on 1) changing the benefit formula to make it less favorable to beneficiaries and 2) tweaking revenue.
Reference:
https://www.ssa.gov/oact/trsum/
https://www.crfb.org/socialsecurityreformer/
This comment makes no sense. Almost every option, if not every option, on the interactive tool would require new legislation be passed.
What else could one do to fix the problem other than decrease your costs or increase your revenue? On the revenue side this tool allows one to consider changing the payroll tax rate, broaden the payroll tax base and change how social security benefits are taxed. I won’t call these tweaks.
Sure, there could be some more options. For example, under broaden the tax base they only consider ways to tax more earned income. Why not tax unearned income too?
You missed the phrase “and would be unpopular with the current administration”. Personally, I would like to see some funds going to vanity projects, slush funds, foreign wars with no imminent threats, and containment facilities for humans going to items that help low and middle income people, as well as restoration of the foreign aid that Elon/Doge/AI arbitrarily cancelled.
To address your last sentence, without an income exclusion for lower levels of unearned income, taxing unearned income would hurt the middle class, and those at lower income levels who are trying to save money for the future. And if you meant unrealized unearned income, that introduces even more issues.
Jmo.
No interest in taxing unrealized income. That’s why I didn’t include the term “unrealized” in my post.
Almost any change big enough to solve the shortage will have to impact a large part of the population. The most obvious example would be to raise the payroll tax rate.
Unearned income includes IRA distributions. We’ve already paid payroll tax on our contributions, I don’t want to pay again when the money comes out.