Status of the Social Security Trust Fund, Fiscal 2020: Beware of Vicious Dog

Status of the Social Security Trust Fund, Fiscal 2020: Beware of Vicious Dog

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Will Social Security Be There for You? Yes, but…

By Wolf Richter for WOLF STREET.

The Social Security Trust Fund – officially the Old-Age and Survivors Insurance (OASI) Trust Fund – closed the fiscal year 2020 at the end of September with a balance of $2.81 trillion, the second highest fiscal-year close, behind 2017, up by $6.8 billion from a year ago, and up by $10 billion from two years ago, according to figures released by the Social Security Administration. The Trust Fund has vacillated in the same range since 2016, after growing substantially over the past decade.

The balance is seasonal and peaks in June. The all-time peak was in June 2017, at $2.85 trillion. In June this year, the balance was $2.84 trillion. So far so good:

The Trust Fund invests exclusively in special issue Treasury securities, of two types: $2.797 trillion in interest-bearing long-term special issue Treasury securities and $14 billion in a short-term cash management security, called “certificates of indebtedness.” These securities are not publicly traded, and so their value doesn’t change from day to day with the whims of the market. The Trust Fund purchases them at face value, and the US Treasury redeems them at face value.

By contrast, a bond mutual fund that holds marketable Treasury securities must “mark to market” its Treasuries on a daily basis (producing a gain or loss).

By investing exclusively in Treasury securities that are not exposed to market whims, the Trust Fund follows the most conservative – meaning, low-risk – strategy possible.

This setup is an efficient, low-cost way of administering the Trust Fund and doesn’t allow Wall Street to extract fees and load the fund up with risks. That’s why Wall Street hates the Trust Fund and wants to “privatize” it in order to get its hands on the $2.8 trillion, extract fees out of it, and use it as dumping ground for its risks.

According to the 2020 Trustee Report, 54 million people drew Social Security retirement benefits at the end of 2019:

  • 48 million retired workers and dependents of retired workers
  • 6 million survivors of deceased workers.

The Disability Insurance (DI) Trust Fund is separate from the OASI Trust Fund, and is not part of this discussion here. But just to note: In 2019, it paid benefits to 10 million disabled workers and dependents of disabled workers.

During 2019, 178 million people paid into Social Security via payroll taxes. These contributions, together with interest income from the securities, generated income of $1,062 billion. Total costs of the program were $1,059 billion. A $3 billion surplus. That was for fiscal 2019.

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Wolf Richter

In his cynical, tongue-in-cheek manner, he muses on WOLF STREET about economic, business, and financial issues, Wall Street shenanigans, complex entanglements, and other things, debacles, and opportunities that catch his eye in the US, Europe, Japan, and occasionally China. WOLF STREET is the successor to his first platform… TP-Title-7-small-200px …whose ghastly name he finally abandoned in July 2014. Here’s the story on that. Wolf lives in San Francisco. He has over twenty years of C-level operations experience, including turnarounds and a VC-funded startup. He earned his BA and MBA in Texas and his MA in Oklahoma, worked in both states for years, including a decade as General Manager and COO of a large Ford dealership and its subsidiaries. But one day, he quit and went to France for seven weeks to open himself up to new possibilities, which degenerated into a life-altering three-year journey across 100 countries on all continents, much of it overland. And it almost swallowed him up.