alt Hacker NewsCan someone explain the legal structures in place in the US that make Social Security "run out"? Because it just sounds like deliberate indirection put in place by the government to cut funding for pensions?
In Australia, we have a universal, means-tested pension funded through consolidated revenue (i.e taxes). The pension can't "run out", because it is just a law that says that the government will pay you $X after you turn a particular age, if your assets are below a threshold. But if X were too high the Government would need to raise taxes, borrow money or print money to fund it, like all government spending.
Separately, we have superannuation - which I think is similar to 401k except compulsory for employers to pay 12% of your salary into, which are personal retirement savings held in trust to be released at your retirement, but generally these are account-based and in addition to the pension if you are eligible (i.e what you put in is what you get out).
There are older "defined benefits" superannuation funds where payouts aren't account-based (I think based on years of service in government roles or something like that) but they have been phased out to avoid the moral hazard of something government-adjacent having pension liabilities they cannot meet with their member's funds.
So what exactly is Social Security if it can run out? It sounds like a defined-benefits fund that is run by the government - in which case why has nobody closed it off to new members like Australia did when the writing was on the wall?
Replies
> It sounds like a defined-benefits fund
The first key is that it isn't defined-benefits, in the sense that there is no account labeled "Bob Smith's Accumulated Retirement." Don't be disheartened though, because many Americans have the wrong idea too. [0 - See rant in footnote.]
In addition, the US has no constitutional barrier to protect it, the federal legislature can pass a regular law which completely rewrites the benefits however they like. It could be very unpopular, though.
> Can someone explain the legal structures [...]
It has grown a lot of bells and whistles over time, but at the core its formal original name of "Old-Age, Survivors, and Disability Insurance" is very informative.
* The premiums for coverage are collected as a tax on the working.
* Payout conditions broadly involve being alive and not able to earn enough to stay that way.
* If you pay in and then die young and healthy, you don't get anything. This is normal and intended, the same way that home fire insurance doesn't pay if your house is swept away by a tsunami.
* The program's surplus funds (from planned-for demographic shifts) is invested in bonds with the US government, meaning that there's an intra-governmental credit/debt going on, where OASDI/SS is the creditor and government-in-general is the debtor.
> [...] that make Social Security "run out"?
Most of the "run out" talk refers to a period of time where the invested surplus dwindles due to yet-more demographic shift, and cannot cover the difference between inflow and outflow. At that point one or both of these will have to happen:
(A) Congress passes a law increasing premiums/taxes on current workers
(B) Congress passes a law saying it's OK to pay less than the program did before.
Congress has been procrastinating on this for many decades.
__________
[0] I blame this on deliberate tactics by big-banks, and political groups ideologically opposed to the program. Private banks are unable to make big bucks offering a competing insurance plan, so instead they promote a false comparison. It goes like this:
1. They falsely assert that X% of the current surplus is somehow already exclusively "yours."
2. They claim that "your" money exists in a boring lame government retirement account which only invests in bonds. (Only half-true, in that the surplus is in bonds.)
3. They ask if you'd rather have the option of moving the money to a new account run by Big Bank, who is so much cooler will help you (for a modest fee) invest in stocks which go up much faster so "your" money will be zillions by the time you retire.
> I think based on years of service in government roles or something like that
More or less, with qualifications and levels of degree.
Eg: Was the Second Malayan Emergency active or "peacetime": https://www.abc.net.au/news/2026-07-12/rifle-company-butterw...
Active service in a recognised danger zone ups the pension rate and expands the health benefits (as does exposure to fallout - they like to medically track anyone touched by atomic testing).
Social security is funded through payroll taxes on employees and emloyers. The "run out" is in the sense of the amount of money going out exceeds that coming in and the saved funds have been depleted. In this sense, it can "run out" that the savings are depleted and the plan is cash flow negative.
Social Security will not run out. It simply won't be taxing current workers enough to pay current retirees. This demographic problem was easily foreseen which is why there is a trust fund to "run out" to begin with. For quite some time social security operated in a surplus since there were many workers per retiree collecting benefits. Now we are around 3:1 workers:retirees and expected to drop to something like 2.2:1.
Where this gets confusing is that most folks seem to have the mental model that Social Security is a pension or some weird retirement account. It is not.
Social Security is simply a pay as you go means tested welfare program. It just means tests in a strange way. If you ended social security taxes today, the trust would run out in a few months and there would be $0 to pay retirees. It's current workers paying for current retirees. Social Security is simply an income tax like any other, but it's separated and marketed the way it is to purposefully make people think it's "their money" and make repealing it politically impossible.
It's just a means tested entitlement program funded by current tax receipts dressed up in fancy marketing. It functions much more similarly to SNAP (food aid) than it does a pension.