When puzzling about what to do with the country's surplus funds, mention is often made of the Social Security surplus. Perhaps this is proper terminology for our pay-as-you-go Social Security system. A pay-as-you-go system has the disadvantage that the current retirees' benefits are being paid for by the taxes of all current workers, often the children and grandchildren of the retirees.
It grates on the nerves of pension actuaries who are used to planning only "fully funded" pension plans by law. A fully funded pension plan is one where sufficient funds are always present to pay the benefits to every participant. These funds are never called "surplus," rather are denominated "reserves." Most actuaries would like to see the Social Security system move toward a fully funded system by calling those "surplus funds" reserves and by beginning the process of adding to them when federal surplus funds become available to move gradually to a fully funded system.
Full funding would require a contribution from the national surplus of several years but would have the advantage of no further need for Social Security tax increases, and workers would be confident that all would receive their benefits as promised. Investment of these reserves is another question, but wise investment could eventually result in a reduction of future Social Security taxes.
Dale Brimley
Murray