what is the social Security trust fund? how does it work? where do payroll taxes go?

Question

From what fund do retirees get there social security? what do treasury securities(T-bills, T-notes and T- bonds) have to do with the social Security Trust Fund.

Answer 1

I'll try to keep it brief. First, current retirees are funded from the inflow of social security taxes currently being paid. Nothing else.

Now those revenues are currently higher than the social security outlays have been. That is the social security surplus. In theory it would be nice to save this excess money for the future, when we know that the changing ratio of more old people to fewer young people means that outlays will exceed tax revenues each year.

So, in theory this surplus is saved each year into the Social Security Trust Fund. However, in fact no real savings occurs. It never has. The surplus funds in reality are spent as part the general federal budget. They are not saved at all. Sometimes politicians complain that their enemies are "raiding the social security trust fund" -- but that is a false charge. This is how the system was designed to work 70 years ago, and the government is required by law to spend the surplus. The government CANNOT save that money, by law.

But what happens is the government notes how much Social Security surplus funds there are, and creates a special treasury bond to represent that amount. So it is these special treasury bonds that are kept in a filing cabinet in Maryland (literally) which constitute the trust fund. These are unlike regular T-bonds in that you cannot trade them on the open market. Their only legal purpose is to serve as the social security trust fund.

Note that, if gov't creates a $100 billion bond for this purpose, that frees up $100 billion cash from social security tax revenue that the government can spend on general obligations. So the net effect of this is as if the government just sold $100 billion in T-bonds -- gov't now holds a debt but has cash to spend.

What's a bit mind-bending is that this bond is owned by the government, instead of by a public buyer. So the fund of bonds is both an asset and a debt for the government. It constitutes about 3 trillion dollars of our national debt. But since the holder of these bonds is the government itself, it also constitutes 3 trillion dollars in assets, namely the SS trust fund. It's like if your right pocket owes your left pocket $10 -- one pocket has a debt, the other pocket has an asset, but for your pants as a whole they cancel out.

In the end the trust fund is nothing more than PRE-AUTHORIZED BORROWING. In the future, when social security outlays are greater than the tax collected, the social security system will take one of these special bonds and sell it to the Treasury department for cash, then spend that cash in the form of social security benefits. But where does the Treasury get the cash? They'll get it by selling regular treasury bonds to the public. So every $1 of social security "trust fund" today equals $1 of treasury bonds to be sold to the public in the future.

Answer 2

The Social protection Fund is now operating contained in the purple and the payroll tax decrease will purely recommend that there's a lot less money for social protection. So now they ought to bypass into the Social protection believe Fund to make up the version. regrettably (something Liberals are too stupid to comprehend) is that there isn't any earnings that believe Fund. the in problem-free words element in that believe Fund are U.S. Treasury Bonds. So at the same time as they earnings a unmarried of those Treasury Bonds, they ought to get money out of the final fund to pay for it. the end result's we purely go that a lot extra into debt.

Answer 3

I know one part of your question........That 1% of all earnings are paid into Social Security by each & every legally employed person in the US. The employer deducts it from your paycheck & deposits it in the account under their Employer ID Number & then reports your social security number as the "payee" of these funds.

Answer 4

Many answers to your many questions:

http://www.ssa.gov/history/history.html
http://www.ssa.gov/

Answer 5

yo wassup go to www.aarp.org