Social Security is not a Trust Fund. Most people would admit they understand this; but, when asked to explain how it works, most of us would recite some version of the following:
You work and receive an income. A portion of that income is set aside in a specified account to be used for retirement – probably by other folks. When I retire, other people who are working and contributing will have deposited enough to take care of me as well. The money I earn gathers interest to take care of someone younger that me just as the money my elders paid in takes care of me.
But is that how Social Security set up? Not really.
First, let’s define a trust. A legitimate trust fund is made up of assets that may only be used to carry out the fiduciary responsibility of the trust as outlined by its records and bylaws.
Now let’s compare that to Social Security. Wages are recorded by the Social Security Administration according to individual social security numbers so that benefits may be estimated based on a wage index. In other words, money in money out. So far so good. But what happens to any excess principle or interest in the fund?
It is re-invested. Perfect. So what’s the problem? The problem is WHERE the surplus is re-invested. Regulations on social security only allow excess funds to be invested in special government securities. In other words, the government takes your retirement protection and LOANS IT TO ITSELF!
Why all the fuss – there’s nothing safer than a government backed loan right? Our entire financial system is backed by government currency. Well, let’s ask the last two Chief Executives of these United States how they feel about that theory.
“Trust Fund balances are available to finance future benefits…but only in a bookkeeping sense…they do not consist of real economic assets that can be drawn down in the future to fund benefits. Instead, they are claims on the Treasury that, when redeemed, will have to be financed by raising taxes or borrowing.”
– President Bill Clinton in his Year 2000 Analytical Perspectives
“As a matter of fact, in 2018, the system goes into the red. And by the way, there’s not a Social Security trust. In other words, people think your money goes into the trust and it’s held for your account and then you get it out. That’s not the way it works. It’s pay as you go. It goes in and it goes out. And to the extent that there’s money more than the retirees receive, like it is today, it goes to other programs. And so, what you’ve got is an IOU, kind of a bank of IOUs. It’s an important concept.”
– President George W. Bush on Social Security in 2005
That was years ago. Which direction do you think the pendulum is swinging? Has it gotten better – or worse. It’s your money, don’t you think you should be involved?
Now or never, before there is NO MONEY to cover that IOU, it’s time to ACT!