Here are the facts.

The basic funding mechanism has remained essentially the same since Social Security began:

• Workers and employers pay dedicated payroll taxes (FICA).
• Benefits are paid primarily from those payroll taxes.
• Any surplus is invested in interest-bearing U.S. Treasury securities.
• The Trust Fund earns interest on those Treasury securities. 

However, there have been some important changes over time:

1935 Social Security was created. Payroll taxes were credited to a government account, not yet a formal trust fund. 

1939 The formal Social Security Trust Fund was established. Surplus funds continued to be invested in U.S. Treasury securities. 

1960s–1980s The Trust Fund shifted from holding a mix of Treasury securities to primarily special-issue Treasury bonds. 

1983 reforms Congress increased taxes, gradually raised the full retirement age, and made other changes to build up large Trust Fund reserves for the retirement of the Baby Boom generation. 

A common misconception is that the Trust Fund money sits in a vault. It never has.

Since the beginning, surplus Social Security taxes have been invested in Treasury securities, and the Treasury has used those funds for general government operations while owing the Trust Fund repayment with interest. That investment structure has existed since the program’s early years and has not fundamentally changed. 

In addition to payroll taxes and interest payments on Treasury bonds, income taxes paid on 50% of SS payment go into the Trust Fund.

One major difference today is that Social Security is now paying out more in benefits than it collects in payroll taxes, so the Trust Fund is being redeemed to help cover benefits.

In earlier decades, especially from the 1980s through the 2000s, the Trust Fund was growing because tax income exceeded benefit payments. 

The Trust Fund has always been invested in U.S. Treasury securities and used in roughly the same way since the program’s early years, but Congress has periodically changed tax rates, benefits, retirement ages, and other rules.

And to cope with changing demographics of our population, Congress needs to make more changes to maintain solvency because after all Treasury bonds are redeemed, income taxes paid even will be insufficient to pay full benefits which has been the case since 2021 when bands started to be redeemed.