Where does the Social Security Fund get its money from?

Answer 1

Social Security is paid though a 12.4% tax on payrolls up to $97,500 a year.

If you are employed, you and your employer each pay half of it, or 6.2% each.

If you are self employed, you pay the full 12.4%.

The $97,500 cap means that people making more than that amount every year, will still pay 12.4% of $97,500 or $12,090 in SS taxes a year.

All politics aside, an often-sugested way fix predicted future funding shortages on SS is to raise the cap to a higher amount, perhaps to one million dollars, so most wealthy people pay the same rate (12.4%) as lower income workers. This would mean higher taxes for the rich, thus it is a measure that has always found stiff opposition in Congress.

Answer 2

The above answers explain where the social security program gets current funding, however there is no money in the Social Security Trust Fund, if that's what you mean. The Trust Fund is nothing but a running tabulation of pre-authorized future borrowing -- it consists of special US Treasury Bond entries (held in a file cabinet in Maryland, no joke), which when needed in the future will essentially be converted one-for-one into regular US Treasury Bonds and sold to the public to raise the cash to fund the system in the future.

There is, in fact, essentially no difference between having a Social Security Trust Fund and NOT having a Social Security Trust Fund -- either way we will sell US Treasury Bonds in the future to fund the Social Security shortfall, there is no difference whatsoever.

P.S. The problem with Humuhumu's suggestion above is that if you eliminate the SS tax cap, so that the rich pay more SS tax, they will then also correspondingly receive more benefits upon retirement/death/disability (at least according to how Social Security system currently works) -- therefore that solution would be a wash and NOT generate additional net funding in the long run.

Answer 3

Money from my paycheck goes to SS and then is given to the old guy who is retired next door. SS admin keeps a chunk for their own administrative costs.

Back in the beginning it was a sweet deal; there were 40 people working for each person on SS; now it is more like 2 working for 1 retired. Eventually this pyramid scheme will run out of money.

So for the next few decades count on the retirement age going up, benefits going down and amount taken from your pay going up.

http://en.wikipedia.org/wiki/Pyramid_scheme

Answer 4

F.I.C.A. Withdrawn from your paycheck. (If you are imployed). If your'e self imployed, you do.