Source: Fortune.com
Summary
A proposal by Senators Bill Cassidy and Tim Kaine aims to maintain current Social Security benefits by investing $1.5 trillion in the stock market and borrowing $25.1 trillion to cover the gap between revenue and benefits. However, a simulation by Boston College’s Center for Retirement Research found that the plan is unlikely to work, with investment returns failing to cover the additional debt about 64% of the time. The report suggests that using tax hikes or equivalent benefit cuts to shore up the trust fund and allocating 40% of it to stocks could keep it solvent indefinitely.
Our Reading
The numbers tell one story.
Social Security’s trust fund is projected to run out of money by 2032, and Senators Cassidy and Kaine’s plan aims to fill the gap with stock market investments. The plan assumes an 8.9% annual return on investment, but simulations show that even with a 6.5% return, the investment fund would fail to cover the additional debt about 64% of the time. Meanwhile, Senator Ted Cruz proposes “Trump accounts” for American children, which could potentially revamp Social Security, but raises concerns about how it would affect current retirees.
The strategy enters a familiar phase: relying on the stock market to rescue Social Security.
Author: Evan Null
