Skip to main content

Concierge Financial Planning, LLC

  •  Tel: (908)-543-4036
  •  Email: ann@conciergefp.com
  • Client Login to MoneyGuidePro
  •  
  •  

Concierge Financial Planning, LLC

  • Home
  • About Me
    • About Me
    • Affiliations
  • My Services
    • Financial Planning
    • Retirement Planning
    • The Process
    • FAQ
  • Resources
    • Client Resources
    • Concierge Financial Planning in the News
  • Blog
  • Contact

Expert advice for all walks of life

As a Fee-Only advisor my fiduciary duty is to you alone.
Professional, practical, achievable solutions for your peace of mind

Expert advice for all walks of life

As a Fee-Only advisor my fiduciary duty is to you alone.
Professional, practical, achievable solutions for your peace of mind

Expert advice for all walks of life

As a Fee-Only advisor my fiduciary duty is to you alone.
Professional, practical, achievable solutions for your peace of mind

  Previous   Next

    You are here

  1. Home
  2. Blogs
  3. Stocks to the Rescue?

Stocks to the Rescue?

Submitted by Concierge Financial Planning, LLC on September 16th, 2016

 

No doubt you know the statistics: the Social Security program’s reserves are due to run out in 2034.  At that point, the only money available to be paid out will be money collected that month from those current workers who are paying into the system.  Current estimates say that this will amount to about 75% of scheduled benefits.

There are, of course, a number of solutions.  Congress could gradually raise the ages at which future retirees could qualify for Social Security benefits.  They could (yet again) increase the ceiling on income on which Social Security payments are collected.  Or they could raise the various Social Security and Medicare tax rates on the income below that ceiling.

Each of these solutions is likely to be painful—and politically difficult.  But there might be a better solution.

A research team composed of Gary Burtless of Brookings Institute, Anqu Chen, Wenliang Hou, Alicia Munnell and Anthony Webb of Boston College—tried a different approach to bolstering the Social Security system.  Suppose, they said, that 40% of the current surplus fund could be transferred from their current investment positions—in U.S. Treasury bonds, earning practically nothing—to stocks.  At the same time, suppose you added 2.62 percentage points to the Social Security payroll tax, in order to smooth out the results.  They then looked at different possible outcomes using historical market data.

At the median return, the trust fund would stay solvent over the next 75 years—a great improvement from our current trajectory.  But they also found that 11% of their simulations resulted in trust fund exhaustion—something that will happen inevitably on our present course, but at a lower tax rate. 

What about the argument that the massive cash flows into stocks would result in the Social Security trust fund basically owning the market?  The researchers modeled what would have happened if 40% of Social Security dollars had been invested in equities in 1984, and found that it would only control about 10% of today’s market.

What are the chances that we’ll see index funds in the Social Security trust fund?  If it’s a less painful alternative politically, and Washington recognizes the urgency of fixing Social Security, you might hear a proposal sometime during the next presidency.

Source: http://time.com/money/4427464/social-security-trust-fund-stocks/?xid=tcoshare

By: Bob Veres

Tags:
  • Investing
  • Retirement
  • Social Security and Medicare

   Return to blog

Subscribe to my Newsletter

Categories

  • Behavioral Finance (12)
  • Budgeting (5)
  • Charitable Giving (2)
  • College Planning (2)
  • Current Events (21)
  • Debt (3)
  • Employer Restricted Stock & Options (1)
  • Financial Planning Fundamentals (25)
  • Insurance (6)
  • Investing (31)
  • IRA/401K/403B (4)
  • Lifestyle (13)
  • Retirement (37)
  • Saving (12)
  • Social Security and Medicare (6)
  • Tax (6)

Subscribe to My Newsletter

114 N Rumson Avenue
Margate City, NJ
08402 United States

Disclosure

  •  Tel: (908)-543-4036
  •  ann@conciergefp.com
  •  
  •  

© 2025 Concierge Financial Planning, LLC. All rights reserved.

Website Design For Financial Services Professionals