February 27, 2026
Normally, I confine comments about money to the Working Profit Investment Letter, but I thought Social Security (SS) might crossover to social and historic commentary and so, I hope this helps…my opinion on Social Security.
There is a mostly constant drumbeat about how SS is broke and that payments to future recipients are in jeopardy. I won’t keep you in suspense…I don’t believe that, but with a complicated asterisk. Keep reading.
Very often, those kinds of comments are designed to frighten people, most often encouraging them to subscribe to something or buy something or whatever. I’d just say that if you read a fright piece and you can click to buy something, ignore the message.
Let’s parse fact from fiction. First, a brief history of Social Security.
Social Security was born out of the Great Depression, signed into law by Franklin Roosevelt on August 14, 1935, as part of the New Deal. The catastrophic economic collapse of the 1930s left millions of elderly Americans in poverty, with no safety net to fall back on, making federal action urgent and politically popular.
The original program was straightforward…a federal old-age insurance system funded by payroll taxes on workers and employers. The first monthly benefit check was issued in January 1940.
Important to remember (and not often reported). In 1935, life expectancy in the United States was 61.7 years…Slightly higher for women and slightly lower for men. Social Security kicked in at age 65. This meant that most people would never get it. It was truly designed for the elderly…those outliving life expectancy tables. And those who reached 65 were expected to live another 12 years.
And in total, in 1935, there were only 7 million people over 65…5% of the population. Today, 17% are over 65 totaling 56 million people. A significant explosion in eligible recipients. I’m not parsing differences in that today; full SS is received at 67.
And with life expectancy today pushing 80, it is routinely expected that most everyone will collect it for 13 years. The system was never designed to do that. Basically (excuse the awkward language here), you were expected to be dead before you could collect…
1935 Life Expectancy age 61, benefits at age 65.
2026 Life Expectancy age 79, benefits at age 67.
Over the decades, Congress expanded the program significantly. Disability insurance was added in 1956, Medicare was created as a companion program in 1965, and cost-of-living adjustments (COLAs) were introduced in 1972 to protect benefits from inflation.
By the early 1980s, the system faced a solvency crisis, leading to the landmark 1983 reforms under the Greenspan Commission, which raised the retirement age, increased payroll taxes, and made some benefits taxable.
Today, Social Security covers roughly 70 million Americans and remains the largest federal program, paying out over $1 trillion annually. But its long-term funding gap continues.
Now, there are no actual dollars sitting in a vault or investment account earmarked for future benefits. Here’s how it actually works:
Social Security operates on a “pay-as-you-go” basis. The payroll taxes collected from today’s workers and employers are used almost immediately to pay benefits to today’s retirees and recipients. There is no individual account with your name on it accumulating funds.
Now here’s where concerns arise:
There are two trust funds…the Old-Age and Survivors Insurance (OASI) Trust Fund and the Disability Insurance (DI) Trust Fund. When payroll tax revenues exceed current benefit payments, the surplus goes into these funds. However, the money doesn’t sit in cash…it’s invested in special-issue U.S. Treasury securities (government bonds). In effect, the federal government borrows that money and spends it on general operations, leaving IOUs in the trust fund.
The trust funds have been drawing down for years because benefits paid out now exceed incoming payroll taxes. The Social Security trustees have projected that the combined trust funds could be depleted around 2033-2035, at which point incoming payroll taxes would only cover roughly 75-80% of scheduled benefits.
Thus, automatic benefit cuts unless Congress acts.
Social Security’s solvency depends entirely on future workers paying payroll taxes and the federal government honoring its Treasury bond obligations held in the trust funds. Hold that thought.
It’s essentially a government promise backed by taxing authority, not a funded pension plan with cash set aside. That’s a fundamentally different and more fragile financial structure than most people assume.
OK, so that’s how you get the “SS is broke” verbiage. That uninformed commentary assigns zero value to the Treasury bonds in the trust funds by assuming the government will default. That is simply not credible.
I think we can apply some common sense here and turn down the heat.
First, payroll taxes are a given. We can wring our hands about AI killing jobs and so payroll taxes, but perhaps that will also create new ones…super difficult to forecast all of that…although ‘experts’ are constantly making guesses (nearly all of which I ignore, BTW…they don’t really know). For sure, however, there is a kind of AI-As-Destructive-Agent Hysteria in the air.
But the taxes will be collected and applied. Thus, the second piece is the credibility of the payment on the bonds. Of course, the government will make the bonds good. This is because all they have to do is print some Dollars and pay off the bonds…thus the extreme benefit of borrowing and paying in your own currency. And we’d agree, a default on US Treasuries is a zero-probability event, because…
The government can print the money to pay them off.
Thus, the real issue is:
What will those Dollars be worth? That is, governments have two choices in regard to their debt…they either pay it off or they inflate it away. The overwhelming choice is what you would assume…inflate it away with cheaper money. The value of that money is declining because you are flooding the market with more of it.
So, you will absolutely get your SS payments and benefits. The real question is…will it be enough to help fund your retirement? If you get your check and go to the supermarket and bread is $10/loaf…well, there you go.
SS is really all about the deficits this country is running, deficits that continually expand and grow. And there is, as per normal, zero credible efforts to rein it all in. The President wants to send us all a refund…remember that refund will come from borrowed money. Can’t we stop?
Gold and Silver are your canaries in the coal mine. They both have PhD’s in economics, and the price of both represent the market’s opinion about inflation.
And they are singing for sure.
Thoughts, questions, or reflections? I’d love to hear them. You can reach me anytime at anthony@workingprofit.com
