Status of Social Security and the Trust Fund, Fiscal 2021: Beware of Vicious Dog, by Wolf Richter

The Social Security Trust Fund is not in good shape, and if inflation picks up from where it is, it will eviscerate both the fund but the expectations of millions of its beneficiaries. From Wolf Richter at wolfstreet.com:

Biggest COLA since 1982 already eaten up by inflation.

The Social Security Trust Fund – the Old-Age and Survivors Insurance (OASI) Trust Fund – closed the fiscal year 2021 at the end of September with a balance of $2.76 trillion, down by 2.0% from a year earlier ($2.81 trillion), according to figures released by the Social Security Administration. After large increases in the prior decade, this was the second annual decline of the Trust Fund since 1990; the first occurred in 2018 (-0.8%).

The Disability Insurance Trust Fund is by law a separate entity from the OASI Trust Fund, and is not part of this discussion here.

The OASI Trust Fund invests exclusively in Treasury securities. At the end of the fiscal year, it held $2.73 trillion in interest-bearing long-term special issue Treasury securities and $22 billion in a short-term cash management security, called “certificates of indebtedness.” These securities are not traded, and so their value doesn’t change from hour to hour, and they don’t need to be marked to market because the Trust Fund purchases them at face value, and the US Treasury redeems them at face value.

By investing on autopilot in Treasury securities that are not exposed to the market, the Trust Fund follows an ultra-low-risk strategy and operates with ultra-low administrative expenses, amounting to just 0.14% of the assets in the fund.

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