Why the Government Borrows Money From Social Security and How It Could Impact Your Future

United States capitol in Washington DC with a Social Security card and money.
zimmytws / Getty Images/iStockphoto

The federal government can borrow money from Social Security funds, but it must pay the money back plus interest.

Money that the government borrows is used to finance governmental operations, similar to how banks use deposits to finance spending by consumers and businesses, said the Center for Budget Policy and Priorities (CBPP).

Social Security is mostly funded through a dedicated payroll tax deducted from workers’ paychecks. Social Security income is deposited into two trust funds — the Old-Age Survivors Insurance (OASI) Trust Fund and the Disability Insurance (DI) Trust Fund. These funds are used to pay beneficiaries and cover the costs to run the program. By law, the Social Security Administration (SSA) says that the government guarantees the money invested in special Treasury bonds and earns interest, VERIFY reported.

“Those bonds basically are an IOU from the government to Social Security,” Mary Johnson, Social Security and Medicare policy analyst for The Senior Citizens League, told VERIFY. “In other words, the Social Security trust fund, which is what is authorized to pay benefits, has been loaning money to the U.S. government.”

Some have claimed that the government’s borrowing from Social Security is “stealing,” but Johnson explained to VERIFY that this is misinformation. According to the SSA, the government is obligated to pay back borrowed funds and has never failed to do so.

Are You Retirement Ready?

The interest that the government pays to borrow this money is additional income for Social Security, according to Johnson, which helps to provide funding for benefits. The AARP reported this helped increase Social Security assets by $66.4 billion in 2022.

More From GOBankingRates


See Today's Best
Banking Offers