Even in the 1980s, Social Security was a “pay as you go” system, with about 90% of it funded by then current worker’s SS payroll deductions.
About 90% of Boomer’s contributions to Social Security went directly to the retirees of the 1980s/90s, plus added significant funds to the SS trust fund (which was largely non-existent).
As demographers began to grasp that the population might not grow forever, this resulted in a 1983 reform of the system to build up a Trust Fund. This raised payroll contributions and changed the Full Retirement Age from 65 to 67.
Boomers, working up through the 2000s, were funding about 90% of the then current retirees Social Security benefits and funding and growing the trust fund.
Yet Social Security has remained a pay-as-you-go system even up to today.
In the 2030s, the Trust Fund will be depleted – and then, Social Security benefits will come only from payroll deductions. Contemporary payroll deductions will make 70-80% of required benefits so benefits payments will be cut.
Note – Social Security does not go “bankrupt” as some on Social Media claim. Instead, it depletes the Trust Fund and reverts to all funding coming from contemporary payroll deductions. This would cut benefit payouts to 70-80% of what was promised.
Duck.AI assistance was used in the creation and subsequent editing of the following sections.
Sources of Social Security Trust Fund Payments
The Social Security Trust Fund comprises a significant portion of the funds used to pay benefits to retirees, disabled individuals, and survivors. As of 2025, it is important to clarify how the trust fund operates and its relationship to current payroll taxes and benefits.
Breakdown of the Trust Fund’s Sources
The trust fund is primarily made up of the following components:
- Payroll Tax Contributions:
- Workers and employers contribute to the Social Security system via payroll taxes (FICA). The current rate is 6.2% for employees and 6.2% for employers, up to a wage limit.
- These contributions create a surplus that was historically used to build the trust fund for future payments.
- Interest Income on Trust Fund Holdings:
- The trust fund is invested in U.S. Treasury securities. It earns interest on these securities, which contributes to its overall balance.
- Taxation of Benefits:
- A portion of Social Security benefits can be subject to federal income tax, and the revenue generated from this taxation also funds the trust.
Historical Context and Current Figures
Historically, the proportion of benefits funded by contemporary payroll taxes has fluctuated. The 1983 Social Security Reform Act was implemented in response to financial shortfalls and aimed to bolster the trust fund. This act increased payroll taxes and altered benefit formulas to support increased funding.
- In the 1980s, the contributions from current taxes created a significant surplus, leading to a larger trust fund.
- Over the years, demographic shifts—such as longer life expectancy and lower birth rates—have affected the balance of contributions versus payments.
Current Funding Dynamics
NOTE – The following item, provided by AI search, is likely NOT TRUE.
Currently, the funding dynamics reflect the following key points:
- Out of all Social Security benefits paid in 2025, around 86% comes directly from the trust fund.
- Approximately 14% of benefits are derived from current payroll tax contributions, reflecting the ongoing influx from today’s workforce.
- I HAVE NOT BEEN ABLE TO VERIFY THE ACCURACY OF THAT CLAIM OF 86%. IN FACT, SOURCES SAY WE ARE BACK TO ABOUT 90% OF BENEFIT PAYMENTS ARE DIRECT TRANSFERS FROM CONTEMPORARY WORKER PAYROLL DEDUCTIONS.
I do not believe the above claim of 86% of benefits are from the trust fund is true – the majority of benefits are paid from current payroll taxes – and a minority are from the trust fund – as best I can tell.
Consequences of Trust Fund Depletion
The Social Security trust fund, which was around $2.8 trillion as of recent estimates, is expected to be depleted by the early 2030s if no changes are made to the program. This depletion would lead to an inability to fully pay benefits, requiring a shift to primarily reliance on payroll tax contributions, which may not cover the total costs.
