In early June, the trustees of the Social Security trust fund noted in their annual summary report that the primary trust fund for paying reserves will run out in 2034 — 12 years from now.
Amazingly, that projection is very close to one made by Peter Ferrera in his book titled “Social Security: The Inherent Contradiction,” which he published in 1980. Besides my admiration for so accurately forecasting a complex actuarial system over 50 years, two other things strike me. One is that baby boomers have had at least 42 years to fix this. Like, what the heck? I will become eligible for Social Security retirement payments in 2034.
More seriously, however, the real thing we should understand about the trust fund is this: It’s a fiction that, while useful, isn’t particularly important.
Benefits get paid from current Social Security payroll taxes. The government is not actually investing our dollars. Technically, yes, a partial and temporary surplus of payroll taxes gets parked in low-interest Treasurys, but by no means is this the real source of our Social Security payments. It’s a pay-as-you-go system in which current workers pay for past workers.
Understanding this fiction is the key to remaining calm about Social Security. Rather than panic about the trust fund running out, we…
