Where does all the Social Security money go?

Where does all the Social Security money go?

Former United States President Franklin D. Roosevelt signed the Social Security Act into law on August 14, 1935. One of the benefits provided to United States citizens by the Social Security Act is a payment of “social insurance” to people over the age of 65 – today, the youngest age to receive disbursements is 62 – after they retire.

Social Security has unarguably helped millions of Americans live better lives. However, if you’ve listened to the news even loosely over the past few years, some news sources reference the potential end of Social Security disbursements for future generations.

But why?

First, let’s cover the basics of Social Security, its principles, and where all that money flows, anyways.

Get off my lawn and give me my Social Security check!

Paying Taxes Towards Social Security

Americans pay taxes including FICA (Federal Insurance Contributions Act), which includes Social Security and Medicare.

Employees have 6.2 percent of all gross receipts deducted up through $127,200 (per 2017 figures) for Social Security, of which their employers match equally. Together, this 12.4 percent of untaxed wages and salaries is contributed to the following:

  • 72% – Trust fund that pays out monthly benefits.
  • 16% – Fund that distributes Social Security to disabled persons.
  • 9% – This portion enters a fund that sends payments to surviving immediate family members of deceased employees.
  • The remaining 1-odd percent goes to administrative costs.

Wait – What If There’s Money Left Over?

Yes, at the end of each fiscal year, money collected in the name of Social Security payments isn’t always less than what was required to keep retired, disabled, and widowed family members going.

All that money is invested in bonds to help build interest and combat the detrimental powers of inflation.