US Markets
Thursday, October 5th, 2023 2:03 pm EDT
Key Points
- Social Security Trust Fund Shortfall: The Social Security trust funds, typically invested in Treasury securities, are projected to run out in 2034. At that point, only 80% of the benefits may be payable. As a result, there is growing discussion about whether the trust funds should also invest in stocks to improve their returns.
- Funding and Investment Challenges: While investing trust fund money in stocks is theoretically possible, it raises several challenges. The primary concern is whether the funds, which are already running low, can afford to invest in stocks while meeting their benefit obligations. The number of Social Security beneficiaries is increasing as baby boomers age, putting additional pressure on the funds.
- Proposed Solution and Risks: Senator Bill Cassidy of Louisiana has proposed a “big idea” fix that involves investing $1.5 trillion separately in stocks on behalf of the program. This approach aims to generate higher returns than Treasury notes and cover 75% of Social Security’s deficit. However, experts caution that borrowing money to invest in stocks carries significant risks, both for individuals and on an economy-wide basis. There is no guarantee that risk premiums will remain favorable over the long term, and the political feasibility of such an approach remains uncertain.
In summary, the article explores the idea of investing Social Security funds in stocks as a potential solution to address the program’s financial challenges, but experts highlight the practical difficulties and risks associated with this approach. The discussion surrounding Social Security’s future funding includes debates about benefit cuts, tax increases, and investment strategies.
For full original article on CNBC, please click here: https://www.cnbc.com/2023/10/05/as-social-security-faces-shortfall-some-propose-investing-in-stocks.html
