Setting the Record Straight: the “Trust Fund Savings Account”



A couple of years ago, these headlines were common on YouTube.  But if you want to learn the SUPER SECRET WAY to access your Social Security account to pay your debts, you can still find a handful of these how-to videos.  Some of them were uploaded pretty recently.

They all revolve around the idea or some firsthand story about someone using their Social Security number to pay off their loans or pay for their bills. 

Instead of using a bank account number or payment card number to pay online, these YouTube creators claim they were able to substitute their Social Security number or “decode” the information on their Social Security cards to discover the truth about Social Security: that we all have personal Treasury accounts.

Presumably, the people pushing this content believe each one of us has a dedicated personal Social Security account where all of our payroll contributions are placed and used to pay our—and only our—Social Security benefits.  If only we knew HOW to access the accounts, we could use them to pay for our expenses as we please.

We’re going to be pretty direct about this one.

Claim: each person has a “Social Security savings account” from which their benefits are paid.

False.  That is NOT how Social Security works.  At all.

There is absolutely NO WAY to use your Social Security number as a form of payment anywhere.  Because there is no such thing as an individual “Trust Fund savings account.”

We aren’t going to spend any time speaking on those who make these claims.  There are any number of things that could be going on to allow someone to use a combination of numbers not associated with a functioning bank card or account to pay for something online—up to and including completely falsifying what they show on screen to PROVE it works.

Instead, we’re going to stick to why that claim is completely untrue.

The belief that we all pay into our own dedicated Social Security savings account isn’t strictly limited to “the U.S. Treasury will hate me for telling you this BIG secret”-style clickbait content.  It’s a misconception many people hold about their benefits, especially when they feel the amount they’re receiving isn’t equivalent to what they’ve contributed.

This belief comes from a total misunderstanding about how Social Security functions now and has always functioned as a program.  And at no point has Social Security ever collected each person’s payroll taxes and put them into an individual account.

In fact, if you’re receiving Social Security retirement benefits right now, the money you’re receiving hasn’t been “yours” for a very long time.  YOUR contributions were spent to pay for retiree benefits almost as soon as your employer withheld them from your paycheck.  Your benefits today are coming from those who are contributing today—not from the payroll taxes you, yourself, contributed.

Social Security is an example of a pay-as-you-go program.  This means when money comes in, it immediately goes out.  It’s funded by a base of workers constantly contributing a portion of their paychecks into the program. 

If for some unknown reason everyone in the country stopped contributing to Social Security tomorrow, benefits for all those who contributed decades before would also cease.  Benefits can only be paid to retirees if workers are actively contributing.  

Very little of those contributions are held back in any kind of savings arrangement (at this time, there are no contributions being held back in reserve since demand on the Trust Fund exceeds contributions).  What has historically been held in reserve is just one big lump of money to be used for everyone’s benefits during times of shortfall.

And speaking of the Social Security reserve, even THAT isn’t held in any kind of account.  THAT money, by law, is used to purchase Treasury bills that are redeemed as needed to pay benefits.  So, it gets spent, too.

The vast majority of what workers contribute, however, goes right into retiree bank accounts in the form of Social Security benefits.  And when those workers retire, their benefits will also be funded by those still working.

So even if there WAS some kind of savings account those contributions got put into, it wouldn’t be a super secret retirement account made for you and only you.  We all contribute to Social Security as one big group.  And as it stands, absolutely none of the money any of us contributes winds up being held in an account, anyway.  It comes in.  Then it goes out.

Additionally, benefits aren’t calculated using the actual AMOUNT you’ve contributed, so holding your actual contributions in an account for you wouldn’t work.  Benefits are determined based on how much income you’ve earned during your highest 30 earning years.  And as we discussed last week, often this means you get a better deal.  Historically, retirees have collected far more in benefits than they contributed during those 30 years.  Supposing we DID use a personal contribution savings account system, most people would get far less in benefits than they do now.

The claim that you have a personal Social Security savings account—and one that you can potentially draw from whenever you want—is categorically false.  They don’t exist.  They’ve never existed.  It’s a complete myth.

And for the record, we don’t suggest you spend any time considering any strategies anyone might post about using your Social Security number to pay for anything.  If for whatever reason you ARE able to use your SSN to pay for something, you’ll probably get into some trouble down the road.

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