Social Security Update Fiscal 2024: Trust Fund, Income, Outgo, and Deficit

Contributions rose by 5.6%, but benefit payments rose by 8.5%. The Trust Fund paid for the deficit, so its balance declined further, to $2.6 trillion.

By Wolf Richter for WOLF STREET.

Total income of the Social Security Trust Fund – technically “Old-Age and Survivors Insurance (OASI) Trust Fund” – rose by $61 billion (+5.3%) in the fiscal year ended September 30, to a record $1.21 trillion, according to the Social Security Administration (blue line in the chart below).

By category of income:

  • Contributions: +$58 billion (+5.6%), to $1.10 trillion due to employment growth and higher wages.
  • Interest income from the securities in the Trust Fund: roughly unchanged at $63 billion.
  • Taxation of benefits: +$3 billion to $53 billion.

But the outgo rose faster than income. Total outgo rose by $102 billion, or by 8.5%, to a record $1.30 trillion (red line).

By category of outgo:

  • Benefit payments: +$102 billion (+8.5%), to $1.29 trillion; more retirees drawing benefits; and COLAs of 8.7% for October, November, and December 2023, and 3.2% this year.
  • Administrative expenses: +$500 million to $4.8 billion. They’re relatively small: 0.17% of the Trust Fund balance, and 0.40% of total income.
  • Transfer to Railroad Retirement Program: +$300 million to $5.9 billion

When the total income (blue) was above the total outgo (red), the Trust Fund ran a surplus and thereby accumulated assets. When the red line rose above the blue line, the Trust Fund ran a deficit and its assets shrank.

The low 2.5% COLA for the 2025 calendar year will slow the growth of the outgo from that direction, but increasing retirements of boomers will cause the outgo to increase further.

The Social Security Trust Fund.

The deficit in the fiscal year was $91.5 billion, the biggest deficit yet, and the fourth year in a row of deficits.

Over the past 35 years, 30 years had surpluses, totaling $2.6 trillion, which accumulated in the Trust Fund. Five years had deficits (2018, 2021, 2022, 2023, 2024), totaling $225 billion.

The shortage between income and outgo is paid out of the Trust Fund, and in the fiscal year, the Trust Fund balance declined by the amount of the deficit, by $91.5 billion, or by 3.4%, to $2.58 trillion.

These figures to not include the Disability Insurance Trust Fund, which by law is a separate entity from the OASI Trust Fund, and is not part of this discussion here.

How the Trust Fund invested the $2.58 trillion.

At the end of the fiscal year, the Trust Fund held $2.39 trillion in interest-bearing special-issue Treasury securities and $197 billion in short-term cash-management securities (“certificates of indebtedness”).

These securities are not traded in the secondary market, and are not subject to the whims of the secondary market, similar to the Treasury I bonds and EE savings bonds that retail investors hold in their accounts at TreasuryDirect.

So the value of these holdings – like the value of investors’ accounts at TreasuryDirect – doesn’t fluctuate with the trading prices in the secondary market. The Trust Fund holds Treasury securities until they mature and then gets paid face value for them. Day-to-day price fluctuations are irrelevant for the Trust Fund.

Investing in Treasury securities when they’re issued and holding them until they mature is a low-risk conservative strategy.

This strategy allows the SSA to operate the system with ultra-low administrative expenses, amounting to just 0.17% of the assets under management.

Fed’s interest rate repression contributed to the deficit.

The Trust Fund earned $63 billion in interest on its Treasury securities in the fiscal year, down by 42% from the peak in 2010, though the Trust Fund balance was a little lower than today.

When the higher-interest-rate securities from before the Financial Crisis matured in 2008 and later, they were replaced with much lower-interest-rate securities as a result of the Fed’s interest rate repression, including QE, which pushed down longer-term interest rates until the 10-year yield finally dropped below 1% in mid-2020.

And the interest income of the Trust Fund – along with the interest income of all yield investors, including savers – took a massive hit.

For example, this fiscal year: If the Trust Fund had earned an average 4.5% on its balance of $2.39 trillion of Treasury securities, it would have earned $107 billion in interest income, instead of $63 billion, and the Fund’s deficit would have been $47 billion, instead of $91.5 billion. Last year, it would have had a surplus!

Now, the maturing low-interest rate securities are replaced with higher-interest rate securities, which is slowly pushing up the average interest rate earned by the Trust Fund.

The average interest rate the Trust Fund earned rose to 2.52% in the fiscal year, from 2.39% a year earlier, and from the low of 2.30% in 2022.

Going forward, the average interest rate will continue to rise as those very-low interest-rate securities, including those issued in 2020, are replaced with higher interest-rate securities. For example, the 10-year yield has risen to 4.3%, from below 1% in mid-2020.

Shifting to shorter-term securities.

The average number of years to maturity used to be around 7 to 7.5 years. But in 2020 it began to drop, likely a strategic decision by the SSA to not load up on the near-0% longer-term securities issued at the time.

In the fiscal year, the average years to maturity declined to 5.19 years, the shortest on record. And the current crop of higher-yielding securities is going to make its way into the Fund a little more quickly.

Tweaking the plan is necessary.

The deficit of $91 billion this year is not large for a $29 trillion economy. If no changes are made to the plan, the Trust Fund will be depleted in about 10 years, and at that out-of-money point, without adjustments till then, either the benefits would need to be trimmed by some percentage to match income on an annual basis, or the general budget would be used to make up the difference. That’s the worst-case scenario, if Congress doesn’t get its act together.

Various proposals have been floated in Congress over the years to tweak the system, but they have gone nowhere. Generally, each proposal tweaks the system in several ways, and each tweak could be relatively small, but combined and over time, it’ll get there. It was done before, and somehow it ended up not being the end of the world. And it can be done again.

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  31 comments for “Social Security Update Fiscal 2024: Trust Fund, Income, Outgo, and Deficit

  1. GuessWhat says:

    So around 2016 is when it leveled off for ~ 4 years and is into decline. I believe the GR moved the depletion date forward by ~ 4 years. I would expect the same to happen over the next five years, and I wouldn’t be surprised to see the terminal date move forward to 2032.

    Time will tell, but something certainly needs to be done fairly soon, even if it’s a few modest tweaks. The same can be said for the annual deficits.

    • Wolf Richter says:

      But in their last report, the Trustees didn’t move the date further. Demographics have a huge impact. The sudden huge influx of young immigrants in 2022-2024 will further move out the date. These kinds of things are exactly why the date keeps getting moved.

  2. sufferinsucatash says:

    But but but I have been told Social Security will not be there for me!

    /s

    • Slick says:

      System is perpetually taking in money, you’ll be fine!
      Good point Wolf, the immigrants working FICA jobs will bolster fund.

    • Sporkfed says:

      Another casualty of saving the too big
      to fail banks. They screwed up the housing markets, the commercial real estate market, Social Security, pension plans, etc…
      But hey, the bankers got to keep their
      bonuses.

  3. MC Bear says:

    Considering it’s easier to forecast outgoing $ from the SS trust fund rather than estimate annual taxes Uncle Sam receives, methinks it’s prudent to start trimming from the pot-o-money rather than raise taxes (specifically income taxes) to balance the fund. Another alternative is levying sin taxes on things folks collecting SS spend heavily on. Or tariffs on classes of goods. Perhaps golf clubs, carts, and balls? Jokes aside, there’s at least 10 years to come up with creative solutions. Write to your congressmen and congresswomen.

    For non-Americans, please buy our goods. Many thanks.

    • JC says:

      Tax the living heck out of the rich and wealthy. Done.

      Before anyone gets sore. Capitalism, money, and economic systems are not religions (….neither are religions). Get over it.

      • ChS says:

        It would be swell if you provided specifics of what tax rates you think are appropriate. The rich already pay a higher percentage of income taxes than the percentage of wealth they own. What is their fair share?

        • OutsideTheBox says:

          CHS

          The RICH already HAVE way more than their fair share .

          That is why they are said to be RICH.

          Having way more than your fair share is the very definition of RICH.

        • ChS says:

          The last time I looked, the top 1% owned about 31% of household wealth and paid about 45% of income taxes.

          I don’t know if that is fair or not, but whenever I look at the numbers I have a tough time being too angry about it.

        • Gary says:

          The Beatles song Taxman specifies the appropriate income tax rate: “1 for you 19 for me [the taxman].” That is a top bracket of 95%.

    • sufferinsucatash says:

      I would think it is easily knowable exactly how many social security withholding taxes they take in.

      It’s right there on your check and on your W-2.

      Heck now if your receive 25 cents from selling on eBay, they are outside at 7am asking for a nickel!

      lol just kidding about that last part.

      Btw the nickel is the large half dime.

  4. Earl says:

    Off topic but related as Medicare is a sister program to SS. Medicare is hobbled by provider abuse and even fraud. Recommended for Wolf’s busted IPO list is PAC Health. It is a highflying, fast growing skilled nursing facility. Went public in April 2024. Currently has 284 facilities in 16 states with 27,000 patients, and plans for more acquisitions. Yearly high $42.94 on Nov. 1. Today fell to $21 after Hindenburg Research alleges systematically scamming the taxpayers. Provides detailed report and of interest is that the described alleged schemes are not unique to PAC Health. Also, Mike Leavitt the former Secretary of Health and Human Services under Bush and son of a former Utah governor is one of five corporate directors.

  5. Redundant says:

    Under current law, a Social Security trust fund cannot incur negative balances.

    Why isn’t this a template for the the presidents budget? Huh?

  6. CASA says:

    How much of that goes to disability and how much has it increased? I volunteer with CASA Court Appointed special advocates and every case I have the parents who lost their kids to CPS are on disability. I didn’t know until this it was so widespread and easy to get. One 27 year old mother who had 4 kids in CPS care was on disability for ADHD. Broken system.

    • Wolf Richter says:

      BS. From the Trustees report:

      “As in last year’s report, the DI Trust Fund reserves do not become depleted within the 75-year long-range projection period.”

      “The DI program continued to have low levels of disability applications and benefit awards through 2023. Disability applications have declined substantially since 2010, and the total number of disabled-worker beneficiaries in current payment status has been falling since 2014.”

      I cover this periodically just to crush this kind of BS. This is from last year:

  7. Gattopardo says:

    Cue up the anti-boomer comments….

    • Wolf Richter says:

      I delete most them, same as with anti-millennial comments. I’m sick of this BS.

      • Gattopardo says:

        You mean it’s worse than what we see?? Yikes.

        You’re going to need some AI to delete that stuff, because it’s only going to get worse as the misinformation highway only gets more crowded.

  8. Midwest Ralph says:

    Is there a possible and reasonable scenario where higher interest rates could balance the budget? Or would the high rates probably be driven by inflation expectations that would just drive payments up if the expectations are realized?

    I would try to math it out myself but I need to get put the next generation of social security payers to bed.

    • Wolf Richter says:

      Short-term interest rates above the COLAs (above inflation) and long-term interest rates 200 basis points above inflation would help a lot. But it would have to stay that way for years because it takes years for higher-interest-rate securities to replace low-interest-rate securities and have an impact.

  9. Propheticus says:

    I am still years away from collecting Social Security but I do receive an annual statement. Here’s a quote from this year’s statement:

    “The Social Security Board of Trustees estimates that, based on current law, the Trust Funds will be able to pay benefits in full and on time until 2034. In 2034, Social Security would still be able to pay about $800 for every $1000 in benefits scheduled.”

    • Wolf Richter says:

      1. LOL, Reddit said that. My SS statement doesn’t say anything like that. It provides a link to a separate page that says:

      “The OASI and DI Trust Funds have reached the brink of depletion of asset reserves in the past. However, in 1977 and 1983, Congress made substantial changes to the program that resulted in the $2.788 trillion in the trust funds today. The combined OASI and DI Trust Funds will be able to pay all benefits in full and on time until 2035. Even if legislative changes are not made before 2035, we’ll still be able to pay 83% of scheduled benefits.”

      As I said in the article, there are three options:

      1. Congress will tweak the system as they tweaked it before (1977 and 1983) and it will be fine for decades

      2. Congress doesn’t tweak the system, and when the money runs out, the system will pay reduced benefits

      3. Congress doesn’t tweak the system, and when the money runs out, the shortage will be funded from the general budget. The shortage is really pretty small compared to the $6 trillion budget and $2 trillion deficit.

  10. dang says:

    There doesn’t seem to be a lack of commitment in the words of the law,

  11. Karl says:

    High strung capitalists seem to have convulsions when someone says something like tax the rich. How about modifying that to say, apply the SS tax to the rich as it’s applied to the poor tax all income (top line) and stop giving an unnecessary and unneeded tax break to those earning over 165K (this year) and stop the corporate giveaway when its employees make over 165K. It’s ludicrous and while everyone knows it’s ludicrous and grossly unfair it’s ridiculously easy to fix. As one Fortune 500 company says: Just do it.

    • ChS says:

      The reason the tax tops out is the benefit tops out as well. SS taxes are already highly progressive.

      How about the retirement age get adjusted more in line with life expectancy?

  12. Doc says:

    Instead of collecting social security, they should die. It’s not like society has anything good for them to do. What use are these people if they can’t work and be factored in as a technical analysis indicator?

    /s

  13. Peter says:

    Change the law so SS invests like state pension funds. They make way more than SS 2.5%. Stop funding government deficit by buying low yield federal bonds. But that’s precisely why this change will not be made.

    • Wolf Richter says:

      1. In 2000-2002, the S&P 500 lost 50% of its value. In 2007-2009 it happened again, -50%. Money printing finally bailed it out. At the time, pension funds were on the verge of collapse, hugely underfunded. So cut benefits by 50% if market values tank like that?

      2. The good thing about SS is that Wall Street gets exactly $0 from it. That’s how it should be.

      3. You can privately invest in stocks, cryptos, commodities, CRE, and election bets if you want, but do not plow MY money into it. Plow YOUR money into it.

  14. Bryan R says:

    Current SS tax rate of 6.2% (for employee & employer) has been in effect since 1990. Simplest solution would be for Congress to increase rate by .1% or .2%/yr. EITC could be increased to offset extra SS taxes for working class families. Same would happen for Medicare tax of 1.45%.

  15. CWSDPMI says:

    Wolf,
    The social security site also provides the COLA increases by year. If you add these to the Average Interest Rate plot, you can see the impact of QE.
    As a thought experiment, I asked how much more would be in the trust fund if it had been paid a historically reasonable interest rate from 2013 until 2023. My numbers (not compounding interest) is about $380 Billion was stolen from the trust fund by QE. In that same time period the Fed paid the treasury over $800 Billion, so our government (effectively) took it out of the Social Security Trust Fund and put it into the general fund.
    Now this doesn’t fix the long term problem completely, but it certainly makes things look much better. That says to me the FIRST thing the government should do is agree to pay the shortage out of the general budget, or at least agree to put half the Fed remittances during QE into the Social Security Trust Fund.

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