Congress stole your Social Security money‼️

Well no it didn’t, although many Americans like to believe that myth. What is true is that the tremendous liabilities accumulated by Social Security are stealing the future from younger Americans. 

Fact: Social Security trusts are running out of money. There are two main reasons. Too few working Americans contributing relative to those collecting benefits and low interest payments made on the Treasury bonds held by the trust. Of course, an implied factor is that, in total, the benefits provided by the system (retirement, survivor, disability, etc.) are too generous for the revenue generated.

Sen Bernie Sanders and others on the left like to perpetuate the myth that Social Security has nothing to do with deficits or debt. The fact is that interest paid on Social Security bonds (and ultimately redeeming these bonds to pay benefits) is a major expense to government.

By 2021, the gov­ern­ment will be spend­ing more on in­ter­est than on all na­tional de­fense. ac­cord­ing to White House forecasts. And one year later, in­terest costs will ex­ceed non­defense dis­cre­tionary spend­ing–essentially every other do­mestic and in­ternational gov­ernment pro­gram funded an­nu­ally through con­gres­sional ap­propri­a­tions. (The largest part of the bud­get is, and will re­main, the manda­tory spend­ing programs of So­cial Se­cu­rity, Medicare and Med­icaid. Manda­tory spend­ing is over $2 tril­lion and is set to dou­ble to $4 tril­lion by 2025.) Wall Street Journal

Now we come to the two-edged sword. Low interest rates are robbing the Trusts of vital income needed for benefits. Increase interest rates and the revenue to the Social Security trusts increases … and the spending on interest costs increases for the federal government. Got it Bernie⁉️ You simply can’t look at one side of this problem and make glib statements about the entire problem as our politicians like to do … and as is too often accepted on face value by under-informed voters. Higher interest payments mean growing deficits and debt or robbing younger citizens of government services …. or higher taxes … and not just on the wealthy. 

But while this [changing demographics; fewer Americans paying into Social Security relative to the number collecting benefits] is the biggest threat to the primary Social Security trust fund, it isn’t the only one. In fact, the decades-long decline in interest rates is almost just as important.

Money in the Social Security trust fund is invested in two types of fixed-income securities. The first are short-term “certificates of indebtedness” that range in duration from one to 364 days. The second are long-term “special-issue bonds,” with a maturity of one to 15 years. At the end of 2014, for example, the trust fund held $57 billion worth of certificates of indebtedness and $2.67 trillion worth of special-issue bonds.

The problem is that the income from these investments is tied to interest rates, and interest rates have been on a decades-long descent since the double-digit inflation of the late 1970s and early 1980s.

In 1990, the Social Security retirement fund earned 9.02% on its portfolio. By the end of last year, it earned only 3.41%.

The problem is that the income from these investments is tied to interest rates, and interest rates have been on a decades-long descent since the double-digit inflation of the late 1970s and early 1980s.
In 1990, the Social Security retirement fund earned 9.02% on its portfolio. By the end of last year, it earned only 3.41%.

To put that in perspective, at 3.41%, the trust fund’s $2.73 trillion in assets generate $93 billion in income; at 9.02%, it would earn $246 billion. In other words, the decline in interest rates since 1990 alone is currently costing the fund $153 billion per year in forgone income.

The net result is that the Social Security system is indeed in a perilous situation. That doesn’t mean you can’t rely on it past the year 2034, as the political pressure to come up with a solution will be powerful. But it does mean that there will be changes, some of which could decrease the average size of benefit checks in the future.  John Maxfield, The Motley Fool, March 21, 2015