United States citizens are now well acquainted with how the Social Security pensioner system works in the United States. However, there are elements related to the Social Security Trust Funds that may not be entirely clear. For that reason it is much better to know each and every detail if we do not want to make a mistake in the future.
The Social Security Trust Funds mainly make it possible for Americans to count on a pensioner’s pension in retirement. Thanks to this United States government system, retirees can count on enough money to pay their regular expenses every month. With this system of Social Security Trust Funds, the ultimate goal is to ensure this monthly income for citizens.
Within this system there are two key elements. Each one of those elements goes to a different group. Even so, the money is global and the way in which the citizens pay taxes is the same. Therefore, Americans’ taxes go into the general Social Security Trust Funds and then the agency itself divides it into two different ones.
What are the Social Security Trust Funds?
The definition of the Social Security Trust Funds is that they are financial accounts of the Public Treasury of the United States. Within these Trust Funds we find two different parts, as we have already mentioned above. So we are dealing with two different trust funds:
- The Old-Age and Survivors Insurance Trust Fund (OASI).
- The Disability Insurance (DI) Trust Fund.
Each of these funds is responsible for paying a different portion of retirement benefits. Since each is independent, there are usually fewer problems in having enough money available to pay beneficiaries with a benefit.
How do trust funds grow?
The first thing to keep in mind in understanding the Social Security Trust Funds is that the taxes paid to the SSA go into these funds. Therefore, the money the government counts on to then pay the pensions comes from the citizens’ own taxes.
Even so, that money would not be enough in many cases, so alternative actions are sought. In this way, the money that is not needed to pay the current year’s benefits is invested. This investment is made in special Treasury bonds. These special Treasury bonds are guaranteed by the United States Government.
Thanks to the interest generated by the bonds, the Social Security Trust Funds’ budget is much larger and more stable. So once the money starts flowing what it does is it generates a little more money to be able to pay the pensions with less difficulty.