Bipartisan Senators Say Stocks Could Save Social Security; But Critics Warn One Market Crash Could Sink Retirees’ Benefits – Financial Freedom Countdown
The Social Security Trust Fund is on track to run out of money by 2033, leaving millions of retirees facing possible benefit cuts.
Without a fix, retirees could see their monthly checks reduced by up to 20%, forcing many to struggle with basic living expenses.
Senators Cassidy and Kaine Pitch a Bold Plan
In a rare show of bipartisanship, Republican Senator Bill Cassidy and Democratic Senator Tim Kaine have proposed a dramatic new solution: invest part of the Social Security funds in the stock market.
The senators say their plan could preserve full benefits for decades to come and address the program’s critical funding shortfall.
A $1.5 Trillion Bet on the Market
The proposal calls for an upfront $1.5 trillion federal investment into a new investment fund.
The senators said their plan for an investment fund would run parallel to the current trust fund, not replace it.
Over 75 years, this fund would grow through diversified investments in stocks, bonds, and other financial instruments, eventually supplementing Social Security’s payroll taxes.
The blended investment is expected to generate a higher rate of return, helping keep the program from insolvency.
“The Treasury would temporarily shoulder the burden of providing benefits to Social Security beneficiaries; but when the new fund’s 75 years are up, it would pay the Treasury back and supplement payroll taxes to help fill the future gap,” they wrote.
Critics Question What Happens in a Crash
Skeptics worry that exposing retirees’ benefits to market volatility is a dangerous gamble.
A major downturn could leave the fund unable to pay out full benefits, risking financial hardship for millions of seniors.
How the Plan Differs from Today’s System
The Social Security Trust Fund collects money from payroll taxes. Taxes on Social Security benefits are also placed back into the fund.
Currently, the Social Security Trust Fund is required to invest solely in low-risk, low-return Treasury bonds.
Cassidy and Kaine argue that these returns are too meager to keep the program afloat, and say the market offers better growth potential despite the risk.
For reference, Treasury bonds have doubled in value since 2002, while the S&P 500 has risen more than 600 percent over the same period.
The senators also mention that payroll taxes themselves are insufficient to sustain the current Social Security program.
What Happens If We Do Nothing?
If no action is taken, the Trust Fund will be depleted by 2033, and benefits will be cut to match payroll tax collections.
Lawmakers face a stark choice: take a calculated risk on the markets now or guarantee painful cuts later.
Some Experts Say It’s Already Too Late
Economists warn that even if the plan is sound, it may be too late to pull it off in time.
Similar investment strategies work best over longer periods, and with only eight years left before insolvency, the timeline is tight.
Inspired by Other Programs; But Will It Work?
The senators point to the National Railroad Retirement Investment Trust as a success story, where market investments have supported retiree benefits reliably.
According to its most recent annual report, the NRRIT produced an investment return of 18.9 percent in fiscal 2024. “The trust has remained firmly in the black, with returns even exceeding expectations at some points and with payments consistently remaining reliable and on schedule,” Kaine and Cassidy wrote.
But critics note that Social Security’s scale and importance make it a riskier proposition.
No Benefit Cuts; At Least for Now
Cassidy and Kaine emphasize that their plan avoids any cuts to current or near-future retirees. They say the proposal protects every promised benefit, though some experts warn that future market losses could change that.
Raising Taxes Not Politically Viable
Raising taxes to replenish the Trust Fund or cutting Social Security benefits is a political challenge.
Also any changes to the Social Security needs at least 60 votes in the Senate.
As per the latest Social Security and Medicare Boards of Trustees report, the long-term outlook for Social Security’s combined trust funds worsened this year, mainly due to three key factors.
First, the Social Security Fairness Act, signed into law on January 5, 2025 by President Biden, repealed the Windfall Elimination Provision and Government Pension Offset, boosting projected benefits for certain government retirees.
This change significantly increased the strain on the Old-Age and Survivors Insurance (OASI) Trust Fund, and was the main reason the overall Social Security depletion date moved up.
Second, the Trustees now expect the U.S. fertility rate to recover more slowly than before, delaying the return to normal levels by a decade; from 2040 to 2050.
Third, the report assumes a smaller share of future economic growth will go to workers’ wages, further reducing projected payroll tax revenue.
Will Congress Act in Time?
The proposal has bipartisan support, but whether other Congress members would aggree and can pass it before the crisis hits remains uncertain.
Delay could leave lawmakers with no choice but to raise taxes or slash benefits; outcomes both parties want to avoid.
Americans Are Watching and Waiting
Polls show nearly 60% of Americans fear Social Security won’t be there for them when they retire.
With the 2033 deadline looming, public pressure is mounting for Congress to take decisive action.
A Risk Worth Taking?
The bipartisan senators argue that doing nothing is the biggest risk of all.
They say “There is a nationwide appetite to implement a bipartisan, commonsense plan like ours.”
They added that no one on Social Security would see “any change” to benefits as a result of the plan, and pledged to embed safeguards such as annual audits to prevent misuse of the new fund.
“That risk can be effectively managed by putting in place guardrails modeled after those used by the Thrift Savings Plan, including a fiduciary duty to seek a maximal return on investments and deterrence measures to address concerns that a future Congress might want to raid the fund. As for transparency, the new fund should be subject to annual audits published online.” said Senator Cassidy in a press release.
They say a diversified investment approach gives Social Security its best shot at survival; and secures retirement for future generations.
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John Dealbreuin came from a third world country to the US with only $1,000 not knowing anyone; guided by an immigrant dream. In 12 years, he achieved his retirement number.
He started Financial Freedom Countdown to help everyone think differently about their financial challenges and live their best lives. John resides in the San Francisco Bay Area enjoying nature trails and weight training.
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