[jasongi]

Can 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?

[phil21]

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.

[jasongi]

This is the confusing thing, the way it is described is like a hybrid of government welfare and a defined-benefit pension.

How can you simultaneously be "paying into" social security but also have describe it as current workers paying for current retirees?

The only way you really find out which one it is is what happens when it runs out of money - if the government backs it up to give you the full "entitlement" you paid into it, then you were in-fact "paying into it". But if they don't, or change the rules then it sounds like you were just being taxed.

[paytonjjones]

Is there any entitlements program that's not politically impossible to repeal?

Taking away "free stuff", especially once people have come to rely on it, is a political nightmare no matter the structure.

[toast0]

> Is there any entitlements program that's not politically impossible to repeal?

> Taking away "free stuff", especially once people have come to rely on it, is a political nightmare no matter the structure.

Entitlements, namely Social Security, Medicare, VA benefits are (for the most part[1]) not "free stuff", they're programs that people paid into and so they're entitled to the benefits.

When you have a program where you say "work for 10 years and you'll get something when you hit retirement age" or "be in the military and qualify and we'll take care of you in various ways", taking that away should be a political nightmare. That said, the sooner you make changes, the smaller they have to be, and we're running out of time.

[1] There's some stuff in social security for people who have been permanently disabled since before they could work and establish eligibility.

[phil21]

As we saw with the whole DOGE fiasco, a substantial portion of the population would love to tear down current entitlement programs.

Social Security is (or was?) unique in that it was politically untouchable by either side of the aisle. No one was telling anyone they were running for office to cut social security benefits. Plenty run to say they will cut welfare spending.

[toast0]

Social security can 'run out', because it's setup with separate accounting. It's sort of designed that current year social security taxes pay for current year benefits ... in the 70s and 80s increases in taxes and decreases in benefits lead to a surplus of taxes collected which was held under the social security account. Since about 2009, income and costs have been pretty close and since about 2017, costs have consistently been more than income. 'social security runs out' when the accumulated funds have all been paid out.

If there's no other action, current law says benefits will be cut so that benefit payments don't exceed the tax income.

Closing social security off to new workers doesn't help, because current workers pay the bulk of current benefits.

There needs to either be additional funding (from general taxes or a rise in social security taxes) or a reduction in benefits. But nobody wants to do either of those, so chances are we'll get the default option.

On the plus side, I was a teen in the 1990s and my high school economics class suggested social security might not be wholy reliable, so we should separately save for retirement on our own. I estimate we'll have had at least 30 years of warning when benefits are cut, but likely many will still be taken by surprise, or will not have been able to prepare despite foreknowledge.

[jasongi]

> Closing social security off to new workers doesn't help, because current workers pay the bulk of current benefits

You don't have to reduce the taxes. Just phase out the concept that you are paying into a retirement account and call a tax a tax. That means you don't calculate how much an individual receives based on the amount they input.

In Australia, we started a sovereign wealth fund[1] to cover the future liabilities from existing workers eligible for government defined-benefits pensions and closed them to new members. I guess that wouldn't make a lot of sense in the US though given the amount of government debt the US has.

Nowdays in Australia people just have accumulation accounts (super) and the backstop of the universal aged pension.

[1] https://en.wikipedia.org/wiki/Future_Fund

[toast0]

> You don't have to reduce the taxes. Just phase out the concept that you are paying into a retirement account and call a tax a tax.

I don't know how you sell that.

"Hey, guess what whipersnappers? You all will still pay the line item for Old Age, Survivors and Disability Insurance, but you won't get anything from it. Thanks, -- Old People who get to spend 12.4% of your income"

[defrost]

> 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).

[_DeadFred_]

Since the 1980s Republicans have had a plan of 'starve the beast'. They intentionally structure government to be underfunded yet at the same time high debt and as dysfunctional as possible, so that they can point and say 'see, government doesn't work'. All because they are agenda over country/their fellow Americans.

We've had 40+ years with half of our politicians intentionally working to undermine our nation with intentionally bad policy.

[mgh95]

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.

[wahern]

The narrative and word choices are deliberate. Republicans want to get rid of Social Security. So the narrative is Social Security is fundamentally broken, and it can be silently ended through passive negligence without having to take responsibility for ending a popular entitlement. No matter that it was created with the expectation that Congress would periodically adjust the retirement age to keep it solvent, and that it was always intended to provide only a bare minimum benefit, just enough to keep you out of the poor house. Poor houses were real, common things back then, and what the "free market" will result in.

Social Security revenue and expenditures can easily be balanced in theory. But neither party wants to do the right thing--Democrats want to expand entitlements, and increasing the retirement age as originally designed is the opposite of their goal.

[mgh95]

I don't quite understand what you mean the narrative here -- cash flow going negative is a fact. Attempts to discuss the COLA issues in 1970s-1980s [1] have failed. Attempts in the early aughts to divert funds by Bush Jr. [2] (long before I could even vote) were rejected in part because of skepticism stock returns would not perform well. And even today where we have additional tax breaks for seniors under the OBBA.

This has been a long running "heads we win tails you lose" with the older generations toying with the future dating back ~50+ years. Statements about "poor houses" don't mean very much when even uncapping the tax on wages for social security would only close ~61% of the gap [3]. Cuts are coming.

[1] See for example this hill (https://thehill.com/opinion/finance/4258578-the-day-the-soci...) article discussing he issue [2] https://www.brookings.edu/articles/bushs-shaky-retirement-pl... [3] https://www.crfb.org/socialsecurityreformer/

[wahern]

In the 1984 Social Security was in the same situation it was today. To balance things Congress (among other lesser measures) set a new schedule for bumping the retirement age, the last step of which only took effect recently. It's not a coincidence. It's been over 40 years since then; it had been 49 years between then and the creation of Social Security.

The narrative is that Social Security is broken because previous generations were idiots who didn't understand or care that lifespans would increase, yet chose to create a fundamentally unsustainable entitlement program anyhow. But lifespans are right on track today as expected in 1984, just like lifespans in 1984 were exactly where actuarial tables predicted them to be in 1935. And Congress in 1984 expected their successors to do today what the 1935 Congress expected of them. A program isn't fundamentally broken just because periodic maintenance is required. OTOH, in theory the 1935 Congress could have attempted to implement a perpetually self-healing, self-executing algorithm, as could have the 1984 Congress. They didn't because politics doesn't work that way; kicking the can down the road to a future Congress is typical, though kicking it 40-50 years down the road is pretty laudable, all things considered.

Obamacare did try to create a self-executing process to reevaluate costs, and it failed miserably, because it required perennially revisiting contentious points of policy, and to do so outside Congress. The president had the responsibility, but no accountability, because failure would be blamed on Congress, and the Democrats especially. In that light, the approach taken wrt Social Security seems prudent.

[phil21]

> This has been a long running "heads we win tails you lose" with the older generations toying with the future dating back ~50+ years

Yep. I call it the old eating their young. Society cannot exist in such a condition for very long. They will collect full benefits while paying in relatively less, and die before it becomes their problem.

And while Social Security is the big one everyone talks about, there are a whole lot of state and municipal level public pensions that are exceedingly underfunded. These come due at pretty much the same time. The problem was the same with those - workers at the time did not want to pay more taxes but wanted to enjoy the benefits that those current pensioners provided them. They borrowed from the future generations to do it.

[Terr_]

> 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.