How was Social security funded?
- Social Security is financed through a dedicated payroll tax
- The payroll tax rates are set by law, and for OASI and DI, apply to earnings up to a certain amount.
- This amount, called the earnings base, rises as average wages increase.
- That money goes into two Social Security trust funds, called Old-Age and Survivors Insurance and Disability Insurance. The first payout retirement, spousal, and survivor benefits while the second covers disability benefits.
- Throughout its history, Social Security generally has taken in more money than it paid out, generating a reserve that totaled $[tex]2.85[/tex] trillion at the end of [tex]2021[/tex]. That trend of annual net gains is reversing as aging baby boomers swell the ranks of retirees.
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