When was social security moved to general fund

Even though Social Security is mainly funded by a There are three main ways that general revenue has directly or indirectly made its way into the Social Security Trust Funds:. The first of these three cases represents the clearest case of a general revenue transfer, though only the last case was part of the original Social Security financing system.

Importantly, interest paid from general revenue to the trust funds is money the rest of the federal government owes the trust funds.

The below chart puts the above numbers in context, showing that the amount of non-payroll tax income contributed to Social Security has increased dramatically in recent years, largely due to interest payments on a large trust fund and the payroll tax holiday.

In today's dollars, nearly 40 percent of all the revenue transfers into Social Security since have occurred in the past five years.

An additional source of income not counted as general fund contributions above is the amount that the federal government pays on behalf of its 4 million employees, because the government is acting as any other employer would.

The above calculations look at cumulative annual changes but do not consider interest accumulated on direct general fund transfers and the taxation of benefits. Social Security is a largely self-funded program that by law is not allowed to pay out more than it has accumulated in its trust fund.

However, the fact that Social Security is financed through its trust funds doesn't mean it operates independently of the rest of the government's budget. Non-payroll tax funds have already played a significant role in the program's financing. Moreover, As Paul Van de Water at CBPP has explained , "when Social Security needs to start cashing in its holdings of Treasury securities to meet its benefit obligations, the federal government [the general fund] will have to increase its borrowing from the public, or raise taxes or spend less" to finance these costs.

In addition, even after the general fund pays back this borrowed money, the Social Security combined trust funds will only remain solvent through or It would be wise for Congress to start addressing Social Security's funding shortfall soon, not only to spread out the pressure on the general fund, but also to make Social Security solvent for its own sake and avoid a future 23 percent across-the-board cut in benefits.

But as with all bondholders, Treasury has to pay the money back, with interest. Social Security redeems the securities to pay benefits. This borrowing fuels the notion that the government is raiding or even stealing from Social Security and leaving it with nothing but IOUs. The facts: Some have blamed problems with Social Security's financial health on undocumented immigrants draining the system's resources. It's a popular complaint, but a false one.

Noncitizens who live and work in the U. There is evidence that undocumented workers actually improve Social Security's bottom line. Some do obtain Social Security numbers under false pretenses, and payroll taxes are withheld from their wages even though they are not eligible to later collect benefits. The facts: The government does not stow your payroll tax contributions in a personal account for you, to be paid out with interest when you retire. Your benefit is based on how much money you earned over your working life, not on how much you paid into the system.

As noted above, those contributions fund benefits for current retirees and their survivors, and people with disabilities. When you retire, those still working will cover your benefits, and so on.

You might think of it less like saving for retirement — there are other vehicles for that — and more like an earned benefit the government promises to pay so you have at least some income in your later years. On average, it provides about 40 percent of a beneficiary's preretirement earnings.

The formula for calculating benefits is weighted so that they replace a larger percentage of income for lower-wage workers and a lower percentage for upper-income earners.

The facts: This was true until The Social Security overhaul passed by Congress and signed by President Ronald Reagan the year before included a provision that made a portion of Social Security benefits taxable, depending on your income level.

Above those thresholds, up to 85 percent of benefits are taxable. Below them, you don't owe the IRS anything on your benefits. Roughly speaking, Social Security counts as income the money you get from work, pensions and investments; nontaxable interest; and half of your Social Security benefits.

Their rules on taxing benefits vary widely; contact your state tax agency to learn more. The facts: If you are divorced, your former spouse may be eligible to collect Social Security benefits on your earnings record and vice versa. As with benefits for a current spouse , these can be up to 50 percent of the benefit amount you are entitled to at full retirement age.

But those ex-spouse or spouse benefits don't reduce your Social Security. They are distinct payments and have no effect on what you receive each month, even if both a current and a former spouse or multiple former spouses are collecting them.

You get the benefit you're entitled to, based on your earnings history and the age when you file for Social Security. But it doesn't apply to all working beneficiaries and is not permanent.

The rule only covers people who claim benefits before full retirement age and continue working. In this circumstance, Social Security withholds a portion of benefits if earnings from work exceed a set cap, which changes every year and differs depending on how close you are to full retirement age. On the date when you hit FRA, the earnings test goes away — there's no benefit reduction, regardless of your income.

Social Security also adjusts your benefit upward so that over time, you recoup the money that was withheld. You are leaving AARP. Please return to AARP. You'll start receiving the latest news, benefits, events, and programs related to AARP's mission to empower people to choose how they live as they age. You can also manage your communication preferences by updating your account at anytime.

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In the meantime, please feel free to search for ways to make a difference in your community at www. Javascript must be enabled to use this site. Please enable Javascript in your browser and try again. Now Reading:. Membership My Account. Rewards for Good. Share with facebook. Share with twitter. Share with linkedin. Share using email. Myth 1: Social Security is going broke The facts: As long as workers and employers pay payroll taxes , Social Security will not run out of money.

Myth 2: The Social Security retirement age is 65 The facts: Full retirement age, or FRA — the age when a worker qualifies to file for percent of the benefit calculated from lifetime earnings history — is 66 and 2 months for people born in Myth 4: Members of Congress don't pay into Social Security The facts: A common complaint about Social Security is that members of Congress don't bother fixing the program because it doesn't cover them.

Myth 5: The government raids Social Security to pay for other programs The facts: The two trust funds that pay out Social Security benefits — one for retirees and their survivors, the other for people with disabilities — have never been part of the federal government's general fund.

Myth 6: Undocumented immigrants drain Social Security The facts: Some have blamed problems with Social Security's financial health on undocumented immigrants draining the system's resources.