Social Security Trust Funds, Explained

[mickeyd]

This is a darn good primer regarding SSA and how we got where we are today with this program. I think that I was familiar with a lot of these associated facts, but this article draws them all together in a nice readable package. Enjoy!

Quote:

By law, any excess revenue not spent on benefits or administrative costs must be invested in special-issue Treasury bonds that are only available to Social Security. A market rate of interest is paid on these special-issue bonds held by the Social Security trust funds and is part of the income that the program receives. The size of the Social Security trust funds is the value of these trust fund bonds. At the point when income is no longer sufficient to cover full benefits, the bonds in the trust funds are redeemed in order to continue paying full benefits. When all of the bonds are redeemed, and the trust funds are depleted, Social Security can only pay out in benefits what it receives in income from Social Security payroll taxes. The trust funds are primarily financed by a tax, currently 12.4% (6.2% each by employers and employees), on covered wages up to $137,700 for 2020 and $142,800 for 2021. Of the 12.4%, 10.6% goes to the OASI trust fund and 1.8% to the DI trust fund. The trust funds receive additional revenue from income taxes on benefits (a backdoor type of means testing) and interest paid on the bonds held in the trust fund (a form of intragovernmental transfer). Total revenues into the trust funds in 2019 were just over $1 trillion, with $944.5 billion from payroll taxes, $80.8 billion from interest earned on trust fund assets, and $36.5 billion on the taxation of benefits. It’s important to keep in mind that while the Social Security payroll tax rate is 12.4%, the total payroll tax rate is 15.3% when the 2.9% Medicare Hospital Insurance tax is included.

https://www.thinkadvisor.com/2020/11...&utm_term=tadv