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Howard Kossover: Where Social Security benefits come from

Q: Where does money for Social Security benefits come from?

A: The Social Security Administration has three basic sources of income: payroll related taxes, federal income taxes paid on some SSA benefits, and interest to the SSA trust funds.

There are two separate Social Security trust funds, the Old-Age and Survivors Insurance fund and the Disability Insurance fund.

In 2012, combined income to these two funds totaled about $840.2 billion. Of this, about $704.1 billion (83.8 percent) was payroll tax related, 26.9 billion (3.2 percent) from income taxes paid on Social Security benefits and 109.2 billion (13.0) percent from interest to the trust funds.

Payroll tax income in 2012 included General Fund reimbursements largely due to the 2 percent temporary payroll tax reduction.

That legislation provided for General Fund payment to the SSA trust funds to offset the lost payroll tax revenues.

Based on overall taxable income, some people pay federal income taxes on their Social Security benefits.

Most beneficiaries do not pay income tax on their benefits, some pay on up to 50 percent of benefits and some on up to 85 percent of benefits.

This income is designated for Social Security.

In 2012, Social Security combined income of about $840 billion exceeded total expenditures of about $786 billion so agency asset reserves grew by about $54 billion.

Under intermediate assumptions, the 2013 Annual SSA Trustees Report anticipates continued asset growth until approximately 2021 for the two combined SSA Trust Funds although the Disability Trust Fund is the weaker of the two.

At that time, trust fund reserves will be used to pay expenses.

Read the Trustees Report at

Find SSA Trust Fund information, including transactions, holdings and earned interest rates, at the Our Agency tab (solvency section) of and in Fast Facts & Figures about Social Security, 2013, at

Based in Grand Forks, Howard I. Kossover is the Social Security Public Affairs Specialist for North Dakota and western Minnesota. Send general interest questions to him at Read his online articles at