This site is not affiliated with the Social Security Administration or any other government agency.

What are Social Security Trust Funds?

Social Security trust funds are financial accounts that exist in the U.S. Treasury. There are two different types of these accounts: one that pays for survivor benefits and retirement benefits and another that helps pay for disability benefits. Money is deposited in these funds and paid out of them. These trust funds hold money that is not used for Social Security benefits in the current year, as well as other administrative costs, so it’s invested in special Treasury bonds that the U.S. government will guarantee.

How Do The Social Security Trust Funds Work?

The operations expenses for Social Security are handled by the trust funds. Social Security payroll taxes and income are deposited into these funds, and then paid out from the funds. The program can often be described as a pay-as-you-go option, which is funded by the payroll taxes that are collected from workers.

For 30 years, there was a surplus that was collected from the payroll taxes, so the Treasury Department invested that surplus in securities that received interest. This year, Social Security started redeeming the reserve it got from the interest to help pay for some of the benefits. These reserves help make up the difference between income and costs until the reserves are depleted.

The trust funds were invested with U.S. Treasury securities that included bills, notes, and bonds. These funds are guaranteed by the U.S. government, and since the U.S. government hasn’t defaulted on its obligations, it’s one of the safest investments to make. At the end of 2017, there were about $2.9 trillion of securities and the average interest rate was 3.2%.


You do not qualify automatically for Social Security. In its current state, the social security administration has a couple of requirements.

For the OASI, you must be 62 years old minimally and have paid into the system for 10 years or more to receive your social security check.

If you wait until you’re 70, you receive more (because you’ve paid more in).

Additionally, both spouses and ex-spouses can receive funds based on their partner’s or ex-partner’s previous earnings.

If a retiree has a child in his or her older age, the child is eligible to receive benefits as well up until he turns 16 and older if he is disabled.

Amount of Benefits

The amount of money you receive depends on a couple of factors.

If you opt to retire early, at 62, you won’t get as much.

If you wait until you’re fully retired, which the government defines as age 67, you’ll receive more.

If you wait until you’ve celebrated your 70th birthday, you’ll receive even more. However, do not delay. Benefits do not increase after age 70, so you’d be wise to register to receive your benefits as soon as you blow out those seventy candles.

You can see your potential earnings by looking at the retirement calculator at the Social Security Administration website.

Ultimately, the earnings depend on how much a worker made during his 35 highest-earning years.

Disability Benefits

If you’re disabled and unable to work due to physical or mental disability for a year or more, you may qualify for Social Security benefits under the DI Trust Fund. Additionally, your family members could qualify.

Survivor Benefits

The following survivors are also eligible for social security benefits:

  • If a parent dies before you turn 18
  • If a spouse dies when you’re 60 or older
  • If a spouse dies when you’re 50 or older and you’re disabled
  • If your spouse dies and you’re caring for a child that is younger than 16 or a child who is disabled

In specific circumstances, both surviving spouses and children may qualify for a one-time payment of $255 after an eligible worker’s death.

How are the Trust Funds Different?

Even though these two funds are distinct and pay for different benefits, together they are often referred to as the Social Security Trust Fund. One pays for disability and the other pays retirement and survivor benefits.

Social Security trust funds are different from other trust funds, because in the private sector these funds are invested in real assets that can range from stocks to bonds or other financial tools. The Social Security funds are invested in a special type of Treasury bond that can only be redeemed by the Social Security Administration. The government is basically creating an IOU from one of its accounts to another with this type of bond.

What is Social Security Trust Fund Borrowing?

Some critics will claim the government is stealing from the trust fund. In truth, the Social Security Administration has lent and is lending money to the Federal Government from the Social Security Trust Fund.

The Social Security Administration lends money from its surplus. So when the government is running at a deficit and the Social Security Trust has a surplus, the Social Security Administration lends its surplus to the government, and the government pays it back with interest.

Picture one big till of money with different dividers. The Federal Government would have to borrow money anyway, so why not just borrow from the part of the till that has money in it when your section is empty?

Some experts compare social security trust fund borrowing to what a bank does with money when an investor deposits his funds in it. The bank does not just sit on the money. It invests it.

In the same way, the Social Security Administration invests the surplus to help the Trust Fund grow even more.

It’s worth noting that the Social Security Administration does not lend money first. It makes sure it can meet its financial obligation to those who are due to receive social security benefits.

How is the Social Security Fund Funded

When FDR instituted the Social Security Act, the Trust was originally funded through FICA, the Federal Insurance Contribution Act. It’s also known as payroll tax.

Payroll Tax

When the Social Security Act was passed, immediately the federal government began to fund it through the payroll tax, a tax that is automatically taken out of your paycheck.

This tax eventually was increased in the 1980s when the Social Security Trust nearly bottomed out. If there’s ever any excess in the funding, it goes into the Trust Fund which is designed to help offset the needs in the future.

So when you see the 12.4 percent payroll tax deducted from your paycheck, you know you’re among those with an income of up to $128,400 affected by this tax.

Interest Income

The fund is also funded by the interest it generates. The interest is the second largest contributor to the fund after the payroll tax.

From 1983-2017 social security received more revenue than it paid it. It had a surplus. This lead to a $2.9 trillion cash stockpile that continued to earn interest.

In 2017 the interest income generated $85.1 billion for the OASDI Trust.

Taxation of Benefits

After the trust was virtually empty in 1983, Congress enacted the SS reform. This reform included a tax on half of the beneficiary’s payout if the beneficiary’s gross income plus half the benefits exceeded $25,000 for a single recipient and $32,000 for couples filing jointly.

In 1993 Congress added a second tier that allows 85% of social security benefits to be eligible for taxation for individuals earning $34,000 with benefits and $44,000 for couples.

What Happens to the Surplus?

The Social Security Administration invests the surplus monies received into U.S. Treasury securities. These are securities the U.S. government backs with their full faith and credit.

Historically, the U.S. government has never defaulted on its obligations. Furthermore, international investors consider U.S. government securities among the safest investments in the world.

These tweaks to the Social Security System and the Social Security Trust Fund have allowed the fund to grow and thus sustain our elderly, keeping them from living in poverty.

The Financial Status of the Trust Funds

Many worry about the future of Social Security in America. In 2018, the total costs have exceeded Social Security income. The trust funds are currently supplementing the program’s income, in order to pay for benefits until 2034. Benefits are not supposed to stop once Social Security runs out of funds. Instead, if nothing else is done, it would still pay three-fourths the promised benefits using the tax income it gets yearly.

It will be necessary for the government to address the shortfall and determine whether it’s necessary to increase income, reduce the benefits, or a combination of both. If the government acts sooner, it gives workers enough time and notice to make changes to the plan.

Elliot Marks

Elliot Marks

Elliot has spent years providing clear and concise information to help navigate the complex nuances of social security and many other government services in the United States. Elliot has a passion for helping those in need of these services to be able to find timely access to news and information that is relevant and helpful to their daily lives.