The Myth of Social Security’s “Stolen” Funds

“Tell Congress to pay back what they robbed from Social Security, and there wouldn’t be an insolvency problem!” Such pronouncements have now become commonplace as Social Security faces a looming insolvency crisis, but they reflect a persistent misunderstanding that has clung to the program for decades.

Since the June release of the Social Security Trustees’ annual report on the program’s financial health, we’ve seen a spike in media attention to this critical senior support program’s troubles. As expected, the near-term proximity of Social Security’s insolvency has created a wave of warnings about what could happen, along with a steady rush of finger-pointing on the cause of these dire circumstances.

Unfortunately, while the added attention may help prompt Congress to address the issue, it also revives myths and rumors about the source of Social Security’s funding problems.

One of the most frequent claims, especially on social media, is that politicians “stole” money from Social Security. Congress is hardly blameless when it comes to the solvency crisis, but the refrain that lawmakers robbed the trust fund is simply not true – and it distracts from the real problems that need addressing.

How Social Security Finances Operate

To understand why the “stolen funds” narrative is false, it is necessary to first review how Social Security is financed.

The current Social Security tax rate is 12.4 percent, applicable to the first $184,500 of an individual’s earnings for 2026. That tax is typically split evenly between employers and employees for most W-2 jobs, while self-employed individuals pay the whole thing.

Revenue from that payroll tax does not sit as cash inside the Social Security system. Instead, as payrolls are processed and taxes are collected, the Internal Revenue Service forwards the money to the U.S. Treasury, where it is absorbed into general revenue.

This is where the “stolen” myth begins to emerge. The idea is that the government spends the Social Security tax revenue on other things instead of filling the trust fund.

But under federal law, the Treasury Department is mandated to convert Social Security tax revenue into special-issue, interest-bearing Treasury bonds and credit them to Social Security’s trust funds.

So, while the payroll tax revenue goes into the general fund, the Social Security trust fund actually receives an interest-bearing bond that’s ultimately worth more than the tax revenue itself. Former Social Security Chief Actuary Stephen Goss has described these bonds as, in effect, “loans made to the general fund on behalf of future beneficiaries.”

As the Social Security Administration sends out benefit payments each month, Treasury redeems a portion of previously issued bonds to generate the cash needed for benefit payments.

When the cumulative value of the bonds credited to Social Security exceeds the cost of benefits paid, as was the case until 2021, the trust fund reserve balances grew. When benefit payments exceed incoming bond value – as they have since 2021 – the balances decline.

Put simply, the reason the trust fund is diminishing is not because the government is siphoning away some of the incoming tax revenue. It’s because American workers are paying less in Social Security taxes than the program is paying out to beneficiaries.

The Money Flow Is All Recorded

The flow of revenue into and out of Social Security is confirmed via the Trustees’ annual reports, going back to the establishment of the trust funds in 1940. Trust fund balances rose to more than $2.9 trillion in 2020, then began declining in 2021 as benefit obligations outpaced incoming revenue. The 2026 Trustees Report projects that the Old-Age and Survivors Insurance fund (OASI), which pays benefits to retirees, spouses, and survivors, will exhaust its reserves by the fourth quarter of 2032.

In practical terms, those reserves help Social Security make up the difference when scheduled benefits exceed current program revenue.

Why the Myth of Stolen Funds?

Because payroll taxes are exchanged for interest-bearing bonds and the actual cash is absorbed into the U.S. Treasury, many people mistakenly conclude that Social Security revenue has been “stolen,” or at best misappropriated. Uninformed social media posts often repeat complaints such as, “When will Congress repay, with interest, the money stolen from Social Security?”

All of this is easily verifiable by examining the annual Trustees Reports, all of which can be accessed on the Social Security Administration website. Although the format of these reports has evolved over Social Security’s nine decades, every report contains a line showing the trust fund reserve balance at the end of the current year compared to this figure from the preceding year.

Anyone taking the time to follow the year-to-year flow of revenue and expenses can confirm that there are no “missing funds.” For convenience, the Social Security Administration website also provides summary tables that track the trust fund balances through the years, as well as the incoming revenue and the outgoing costs of operation.

The “IOU” Question

As explained above, Social Security revenue is converted upon receipt by the U.S. Treasury into special-issue, interest-bearing Treasury bonds. Critics tend to scoff at this, suggesting that the bonds are nothing more than worthless IOUs and, as such, represent nothing more than an accounting ploy.

While this opinion attacks the legitimacy of the U.S. government’s “full faith and credit” guarantee, it is nevertheless worthy of note that the U.S. government has never defaulted on its Treasury security obligations. The well-regarded National Committee to Preserve Social Security and Medicare (NCPSSM) has pointed out that U.S. Treasury securities are “widely considered by finance industry professionals and foreign governments as the world’s best and safest investment.”

The securities held in the Social Security trust funds are as safe as U.S. Savings Bonds and depend on the solvency of the federal government.

Of course, since the redemption process requires financing, it ultimately adds to overall debt levels. But that’s a different story.

We Know What the Problem Is… Let’s Not Be Distracted by Rumors!

Virtually all organizations researching the looming Social Security insolvency problem are aware of the trajectory toward a crisis in less than six years. And it is a well-established fact that claims of federal government theft of Social Security funds are false and play no role in the program’s financial dilemma.

The unfortunate effect of the “stolen” funds allegation is that it tends to take the public’s collective eyes off the ball and distracts many uninformed voices from focusing on a practical solution to the problem.

That’s where proposals like AMAC’s Social Security Guarantee surface as part of the informed discussion on what must be done to better align Social Security with 21st-Century economic and workforce realities. Instead of chasing after mythical “stolen funds,” AMAC is committed to addressing the real root causes of Social Security’s funding shortfall – thus ensuring the preservation of the program for generations to come.