What is the 'Social Security Trust Fund'

The Social Security Trust Fund refers to two accounts used by the U.S. government to manage surplus contributions to the Social Security system. The Social Security Trust Fund is used when contributions made by workers and employers exceed the amount currently needed to fund the Social Security system to make scheduled benefits payments to retired workers and the disabled. The monies held within the fund are invested in interest-bearing federal securities (Treasury bonds) in order to increase the value of the fund.

BREAKING DOWN 'Social Security Trust Fund'

The two funds that make up the Social Security Trust Fund are the Old-Age and Survivors Insurance (OASI) Trust Fund, which pays retirement and survivor benefits, and the Disability Insurance (DI) Trust Fund, which pays disability benefits. They are often thought of as one fund and referred to as "the trust fund." The Social Security Trust Fund was originally created to account for an anticipated future shortfall in benefits needed to pay retirees via Social Security benefits payments. Following an increase in the Social Security payroll tax in the 1980s, the excess contributions from the tax increase were deposited into the Social Security Trust Fund to be used at a future date when the current assets of the Social Security system are no longer sufficient to cover their obligation. The asset reserves of the combined trust funds amounted to $2.8 trillion as of the end of 2016. For more information, the Social Security Administration (SSA) provides a FAQ guide covering the trust funds.

Social Security Trust Fund Solvency

Under current projections, the combined Social Security Trust Funds will run a surplus until 2022. With the assets currently in the funds, interest and the value of redeemable Treasury bonds, full benefits will be payable until 2034, at which point both funds will run out of Treasury bonds to cash in. After that, Social Security will be able to continue to pay out 75% of scheduled benefits from annual tax income. A number of ideas have been considered to address the coming shortfall, such as raising the retirement age, increasing taxes, cutting spending and benefits and borrowing more.

The SSA produces an annual OASDI trustees report that provides the current and projected financial standing of the trust funds.

Sometimes funds in the trust fund are used for purposes other than providing Social Security benefits. Such a practice creates a federal budgetary obligation (as part of the national debt or intra-governmental debt) to the Social Security Administration, which Congress can choose to avoid paying back by enacting legislation.

  1. Old-Age and Survivors Insurance ...

    The Old-Age and Survivors Insurance Trust Fund is a Social Security ...
  2. Social Security Administration ...

    The Social Security Administration (SSA) is a U.S. agency that ...
  3. Social Security Tax

    The tax levied on both employers and employees to fund the Social ...
  4. Trust

    A trust is a fiduciary relationship in which the trustor gives ...
  5. Trust Fund

    A trust fund is comprised of a variety of assets established ...
  6. Socially Responsible Investment ...

    Socially responsible investing looks for investments that are ...
Related Articles
  1. Retirement

    The Facts About Social Security's Solvency

    Will Social Security really go broke in the not-so-distant future? Here are the facts.
  2. Retirement

    Will the Social Security Cap Increase Help It Last Longer?

    The Social Security cap increase will be 7% in 2017, but even that may not be enough to keep Social Security from running out of funds.
  3. Retirement

    Will Social Security Be Around for My Retirement?

    Here's what you may not know about our Social Security system and how it can affect your future.
  4. Retirement

    Don't Worry Too Much About Social Security

    Is the fear that Social Security won’t be around when the younger generations retire valid?
  5. Retirement

    The Purpose of a Social Security Statement

    Learn what information your Social Security benefit statement contains and how you can use the information to more intelligently plan for retirement.
  6. Retirement

    Top 3 Challenges Facing Social Security

    The first official Social Security card was given out in 1936 and while the system is still paying out, a lot has changed.
  7. Retirement

    How Social Security Will Change In 2015

    The average retiree’s check will rise by 1.7% in 2015, the Social Security Administration says. And the ceiling on taxable earnings will rise, as well.
  8. Retirement

    How Social Security for Legal Immigrants Works

    If you, an immigrant, earn enough work credits in the U.S. – or combined with credits from certain other countries – you can claim benefits. Here is how.
  9. Retirement

    Are Social Security Benefits a Form of Socialism?

    Socialism is a loaded word in the U.S., but Social Security, one of the nation's most popular benefit programs, is wholly government-run.
  10. Retirement

    How to Fix an Error on Your Social Security Check

    For many seniors, social security benefits checks are their income stream which means the benefit has to be correct. If you spot an error, you can fix it.
  1. Why is Social Security running out of money?

    The good news is Social Security is no where near bankruptcy however find out why you may not have Social Security benefits ... Read Answer >>
Trading Center