Editor’s Note: After a long career in the data processing industry, Russell Gloor joined the Association of Mature American Citizens in 2013. Gloor received training from the National Social Security Association and was accredited by the NSSA® as a Social Security adviser in 2016. Currently part of the AMAC Foundation’s Social Security Advisory team, he annually counsels thousands of American seniors about their Social Security options. In addition to answering Social Security questions daily, he also authors the AMAC Foundation’s nationally syndicated weekly “Ask Rusty” advice column and has written three instructional books about Social Security.

Dear Rusty: The Social Security program is funded by employees and their employers. The federal government does not contribute to the program, right? So why does the federal government feel they have the right to raid the fund? All the money sent to Ukraine and other unnecessary programs could have been used to pay back what they owe to Social Security. Signed: Disgruntled Senior

Dear Disgruntled Senior: You are correct the Social Security program is mainly funded by payroll taxes on employee earnings and by employers who match those employee contributions. Some additional Social Security revenue is received from income tax on Social Security benefits, as well as from interest on the special issue government bonds held in the Social Security Trust Fund. But the assertion the federal government used (raided) the Social Security Trust Fund for any other purpose is a myth. All Social Security revenue received since the program began in 1937 has been accounted for, and all excess funds are contained in a special trust fund in the form of interest-bearing government bonds, reserved to pay future benefits. The interest on those bonds contributed about $67 billion to the Trust Fund reserves in 2023.

Social Security revenue, today, is not adequate to pay all benefit obligations, and the extra money needed to pay full Social Security benefits for everyone is obtained by redeeming Trust Fund reserves. Redemption of those trust fund bonds is how the federal government “pays back” the cash loaned to it by Social Security. The excess Social Security money received from contributions was loaned to the federal treasury by the Social Security Trust Funds, interest-bearing bonds were issued by the government in return for the cash received and the bonds issued are redeemable as needed by Social Security to pay benefits.

The average interest on the 2023 bonds in the trust funds was about 4.125%, whereas the average rate of return on all bonds held in reserve was about 2.387%. This transaction is the same as for any other investment vehicle, except the bonds in the trust funds are redeemable at any time without penalty. Said another way, all excess money ever received by Social Security is/was invested in special-issue government bonds and resides in reserve to pay future benefits, as needed.

“Paying back” the money represented by bonds held in the trust funds would not be a wise financial move because it would eliminate all future interest earned by those bonds (again, that interest was about $67 billion in 2023). Federal money spent for other purposes (e.g., Ukraine) is from the general U.S. Treasury and not from the Social Security Trust Fund, which is held totally separate from the U.S. Treasury. Since inception, all money ever contributed to Social Security has been (and is) used for one purpose (and one purpose only) – to pay Social Security benefits to those eligible (which, by the way, does not include “illegal aliens” or anyone else who is not a legal resident of the United States).

For clarity, Social Security does have a future financial issue because annual benefit obligations are now greater than annual Social Security revenue and money from the Social Security Trust Fund is now used to make up the difference. Unless the program is reformed soon, the trust fund reserves (about $2.8 trillion as of 2023) will be depleted and benefits for all Social Security recipients will be cut by about 23% starting in 2033 or 2034 (according to the Trustees of Social Security and the Congressional Budget Office).

Congress needs to act soon to enact Social Security reform to restore the program to fiscal solvency. The Association of Mature American Citizens is steadfastly lobbying Congress to enact the needed Social Security reform as soon as possible.

This article is intended for information purposes only and does not represent legal or financial guidance. It presents the opinions and interpretations of the AMAC Foundation’s staff, trained and accredited by the National Social Security Association. NSSA® and the AMAC Foundation and its staff are not affiliated with or endorsed by the Social Security Administration or any other governmental entity. To submit a question, visit their website (amacfoundation.org/programs/social-security-advisory) or email ssadvisor@amacfoundation.org.