What are Social Security Trust Funds?

Social Security is often talked about as if it’s a single pot of money, but it’s actually supported by dedicated trust funds. These funds are how Social Security tracks incoming payroll taxes and pays out benefits to retirees, survivors, and people with disabilities.

The Two Social Security Trust Funds

There are two separate trust funds that support the program. One covers retirement and survivor benefits, while the other is specifically for disability benefits. Workers and employers contribute to both through payroll taxes deducted from paychecks.

What Happens to the Money

Payroll taxes flow into the trust funds and are used to pay current Social Security benefits. When more money comes in than goes out, the excess is invested in U.S. Treasury bonds, which earn interest. This structure helps strengthen the system over time.

Is Social Security “Running Out of Money”?

When headlines say Social Security is running out of money, they’re not saying the program is disappearing. Workers are still paying into the system every paycheck. What those headlines are really referring to are the trust fund reserves, not the end of Social Security itself.

Think of It Like a Checkbook

An easy way to understand this is to separate the program from the funding. Social Security is the program, and the trust funds are the program’s checkbook. It’s a simple distinction, but an important one for understanding how Social Security really works.

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Shawna Theriault, CFP®, CPA, CDFA®
Senior Financial Advisor, Wiser Wealth Management

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