Study: Bipartisan Social Security investment plan unlikely to pay off

A proposal would borrow $26.6 trillion over 75 years, seed a $1.5 trillion investment fund in equities and other risky assets, and use the remainder to cover annual Social Security benefit gaps. After 75 years, investment proceeds would repay the Treasury, with leftover gains intended to offset the total borrowed. Simulations across 10,000 market scenarios show the fund would fully cover the borrowed amount about 64% of the time under a 6.5% real annual stock return assumption, but only about 19% at a 4% real return median outcome. Benefit shortfalls and delayed cost-of-living adjustments could push older homeowners toward reverse mortgages, increasing demand. Equity investments could improve solvency if paired with payroll tax increases or benefit changes, including investing up to 40% of trust fund assets in equities.

"Cassidy's and Kaine's proposal would borrow a total of $26.6 trillion over 75 years, while $1.5 trillion would seed a separate investment fund placed into equities and other risky assets. The rest would cover annual benefit gaps. After 75 years, investment proceeds would repay the Department of the Treasury, with leftover gains helping to offset the total tab borrowed, according to the plan."

"A simulation of 10,000 possible market scenarios, detailed in the brief, found that even assuming a robust 6.5% real annual return on stocks matching historic highs the investment fund would fully cover the amount borrowed roughly 64% of the time. Under a more modest 4% real return forecast by many financial firms, the fund would reportedly offset just 19% of the $26.6 trillion at the median outcome."

"A potential shortfall in Social Security benefits could also drive older homeowners toward reverse mortgages. If trust fund insolvency forces across-the-board benefit cuts, and if annual cost-of-living adjustments continue to lag real inflation experienced by seniors particularly for health care and housing millions may find their monthly income falling well short of basic expenses. Reverse mortgages could become an essential lifeline. Demand for these loans may accelerate sharply as retirees seek to replace lost or eroded Social Security income."

"In simulations where lawmakers immediately raise payroll taxes enough to close the 75-year shortfall a 3.82% increase under current law and then invest up to 40% of trust fund assets in equities, the outcome shifts dramatically. At the median projection with 6.5% real returns, the trust fund would hold assets equal to 10.1 times annual outlays in 75 years, compared with just 0.7 times if left entirely in special-issue Tre"

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