Why Isn't Social Security's Reserve/Trust Fund In Equities?

[Blue Collar Guy]

With a little google work I just discovered that the money we pay into social security is invested 100 % in treasuries. I remember in the early 80's when "they" redid the formula for full retirement age as i was affected. So this running out of money/ shortfall is not a new phenomena. So why not a little bit of equity exposure? Like a 50/50 or what ever the great economists think is best? Thanks for the info. Im going to google some more and see why this has not happened. I think this is a Nobel prize idea. I would think that even a 25 % equity exposure would solve things.

 

[RetireAge50]

My guess is because it takes real money to invest in stocks. The SS money coming in just means the government has to borrow less.

 

[Blue Collar Guy]

My guess is because it takes real money to invest in stocks. The SS money coming in just means the government has to borrow less.

OMG, Please dont tell me this is why. This thread had been up a while, and the lack of other answers is starting to give me pause to think your not kidding. Come on folks 25 % into equities(or what ever the best percent is) seems like a home run idea. I originally said Nobel prize, but your all making me nervous so Ill settle for homerun.

 

[MRG]

Kinda sums it up for me. No judgement or "P" word intended.


https://youtu.be/63NiS3uZaTA

Foo Fighters- "Let it Die".

I sent this link to my representatives, then the black SUVs arrived.

 

[UnrealizedPotential]

I heard on the radio today that SS will go broke in 17 years if nothing is done. So if this is true, then clearly some changes somewhere will have to be made. I suspect they will be painful changes. I am 47 and am wondering if I will ever see a SS monthly check, provided I live to be old enough.

 

[REWahoo]

I heard on the radio today that SS will go broke in 17 years if nothing is done.

Don't believe everything you hear on the radio.

The truth is not pleasant, but far less a doomsday apocalypse than the scare tactics from "go broke" headlines.

If Congress doesn't act soon, tens of millions of Americans will only receive about three-quarters of their Social Security benefits when they retire in the future.

Without action, Social Security trust fund will be tapped out in 17 years - Jul. 13, 2017

 

[Aerides]

The "SS will go broke in X years" has been going on for X+Y years. You can find the same headline back as many years as you care to look.

25% in equities sounds like a great idea until you have your government in charge of that, and then, 2008 happens, etc.

 

[38Chevy454]

SS is like a pyramid scheme. There is no real investment. Workers paying in now are providing the money for the recipients now. Any excess the gov't loans to itself.

There is no lockbox, there is no account with your name on it with money behind it.

 

[Blue Collar Guy]

The "SS will go broke in X years" has been going on for X+Y years. You can find the same headline back as many years as you care to look.

25% in equities sounds like a great idea until you have your government in charge of that, and then, 2008 happens, etc.

Just have them invest in equities, they arent in charge of the companies

 

[GrayHare]

Equities are generally thought to be too risky for these funds. Then there is the huge temptation of corruption. Nah, instead just gradually increase the FRA as has been done before.

 

[meierlde]

Note George W Bush proposed this and got shot down in flames over it. In any case in 17 years the income from the tax will pay something like 71% of benefits a big cut but not the end of the world.
The only thing that might work is using a total us stock market fund, based on a defined index so the investment is able to run on autopilot no human need be involved.

Note that my mother thought in her 40s SS would not be there for her, but she got benefits from 62 until her death. She told me that my grandfather did not expect to get anything from SS but he got the benefits from 65 until he died.

 

[Rustward]

SS is like a pyramid scheme. There is no real investment. Workers paying in now are providing the money for the recipients now. Any excess the gov't loans to itself.

There is no lockbox, there is no account with your name on it with money behind it.

Did you mean a Ponzi scheme?

 

[Blue Collar Guy]

Note George W Bush proposed this and got shot down in flames over it. In any case in 17 years the income from the tax will pay something like 71% of benefits a big cut but not the end of the world.
The only thing that might work is using a total us stock market fund, based on a defined index so the investment is able to run on autopilot no human need be involved.

Note that my mother thought in her 40s SS would not be there for her, but she got benefits from 62 until her death. She told me that my grandfather did not expect to get anything from SS but he got the benefits from 65 until he died.

I didnt know this. I need to look at this, back test it and see what the returns would have been. What was the objections?

 

[Blue Collar Guy]

Note George W Bush proposed this and got shot down in flames over it. In any case in 17 years the income from the tax will pay something like 71% of benefits a big cut but not the end of the world.
The only thing that might work is using a total us stock market fund, based on a defined index so the investment is able to run on autopilot no human need be involved.

Note that my mother thought in her 40s SS would not be there for her, but she got benefits from 62 until her death. She told me that my grandfather did not expect to get anything from SS but he got the benefits from 65 until he died.

OK, I found the suggestion you mentioned. It was April 2005. Can anyone tell me what the return on a 50/50 or 25/75 portfolio was from then? As opposed to the treasury gains that its invested in? thanks or the links Ill try to do the math.

 

[RetireAge50]

There is nothing invested. The money comes in, part of it pays current SS recipients, the rest pays other budget items. End of story.

 

[Blue Collar Guy]

There is nothing invested. The money comes in, part of it pays current SS recipients, the rest pays other budget items. End of story.

Hahahaha, I thought I read they invest the money in Treasuries?
"For nearly three decades, the system took in far more revenue than it paid out in benefits; the surplus was invested in special non-tradeable Treasury bonds, with interest credited to the system’s two trust funds (one for old-age and survivors’ benefits, the other for disability payments). As of July 31, those trust funds together held $2.83 trillion in Treasuries". http://www.pewresearch.org/fact-tank/2015/08/18/5-facts-about-social-security/. This is from August 2015.

 

[travelover]

There is nothing invested. The money comes in, part of it pays current SS recipients, the rest pays other budget items. End of story.

Yup, that's about it. Investing in government bonds sounds so much more responsible.

 

[RetireAge50]

Hahahaha, I thought I read they invest the money in Treasuries?
"For nearly three decades, the system took in far more revenue than it paid out in benefits; the surplus was invested in special non-tradeable Treasury bonds, with interest credited to the system’s two trust funds (one for old-age and survivors’ benefits, the other for disability payments). As of July 31, those trust funds together held $2.83 trillion in Treasuries". http://www.pewresearch.org/fact-tank/2015/08/18/5-facts-about-social-security/. This is from August 2015.

Right. But that doesn't mean anything. The actual money was spent on other budget items.

 

[Blue Collar Guy]

Seems like an easy fix to me. I nominate myself for the Nobel prize anyway. Most of us agree 100 % in bonds is weak strategy, I think even 25 % in equities is a winner idea. I donate my Nobel prize to the social security fund , I probably wont use what I have now.

 

[Hermit]

Just my humble opinion, but the money is counted as available as long as the treasuries are being paid back to SS by the Government. That means the Government will have to come up with the money to pay SS during that time. It is after the treasuries have been paid back that SS is supposed to go broke. If the Government can come up with the money to make up the difference between the taxes coming in and the payments going out until the treasuries are used up, why can't they continue to come up with the money after that date? I think the answer is that doing nothing is a great excuse to cut the SS bill by about 25% so it could happen, but who knows?

 

[Senator]

I heard on the radio today that SS will go broke in 17 years if nothing is done. So if this is true, then clearly some changes somewhere will have to be made. I suspect they will be painful changes. I am 47 and am wondering if I will ever see a SS monthly check, provided I live to be old enough.

Social security will NEVER go broke. They can borrow the money to pay it. And they borrow the money from the Government itself, so they do not have to pay it back.

My guess is because it takes real money to invest in stocks. The SS money coming in just means the government has to borrow less.

That is exactly why. If they had to relinquish it to a third party, it would have to exist.

 

[Blue Collar Guy]

Social security will NEVER go broke. They can borrow the money to pay it. And they borrow the money from the Government itself, so they do not have to pay it back.



That is exactly why. If they had to relinquish it to a third party, it would have to exist.

Then "they" need to print an extra 700 Billion dollars and follow my investment advice. Problem solved.

 

[meierlde]

Social security will NEVER go broke. They can borrow the money to pay it. And they borrow the money from the Government itself, so they do not have to pay it back.



That is exactly why. If they had to relinquish it to a third party, it would have to exist.

Don't forget there is a printing press in the basement of the federal reserve, that prints money. That is the point of a central bank it can print money as it so desires.

 

[Ted_Shepherd]

Shifts Retirement Assets, Does Not Grow Them

I didnt know this. I need to look at this, back test it and see what the returns would have been. What was the objections?

I forget my source, and cannot verify its analysys, but one objection I read was this: Putting part of the social security "trust fund" into equities would not make the economy grow any faster. It would not increase corporate profits which ultimately are what matters for equity evaluation. The stock market returns going into the trust fund, under your proposal, would simply mean that the other owners of equities, as a group, would lose that income or growth. Those other owners include pension funds like the one NY holds for you, tax-deferred funds like IRAs such as mine, and the endowments of universities and hospitals and charities and nonprofits (to which I contribute squat). Suppose that this is correct analysis (and I don't see flaws). Then what we need is a government that is effective in promoting economic growth. It might be more effective in achieving that goal if it abandons preoccupation with "inequality" and hating on the 1% or the 20% or whomever the favorite whipping boy is right now. So, then, let's address taxes, regulations, laws, and treaties that stymie economic growth without commensurate return. (For the record, I consider conspicuous consumption ugly in this hungry world. By my lights, that spending on luxuries is immoral even though, for example, it supports the jobs of workers in yacht building yards.)

 

[brucethebroker]

From the AP, 4/5/2005: “A lot of people in America think there is a (SS) trust — that we take your money in payroll taxes and then we hold it for you and then when you retire, we give it back to you,” Pres. Bush said in a speech at the University of West Virginia at Parkersburg.
“But that’s not the way it works,” Bush said. “There is no trust ‘fund’ — just IOUs that I saw firsthand,” Bush said.

I have also read that the T-Bonds (IOU's) are special issue that cannot be sold to the the public.

ANY changes to SS are a political hot potato. The other side will always pick apart the ideas and suggestions of the opposition. There was a firestorm of criticism when letting people choose to invest part of their SS contributions in the market was discussed.

Funny, but food stamps, welfare, foreign aid and other spending categories are not subject to the "running out of money" rhetoric. The pols simply print or borrow more money.