Must-Read: Gary Burtless et al.: How Would Investing in Equities Have Affected the Social Security Trust Fund?

Must-Read: Gary Burtless et al.: How Would Investing in Equities Have Affected the Social Security Trust Fund?:

Our simulations suggest that equity investments would have been helpful historically and can be helpful prospectively… 

Investing part of Social Security reserves in equities can reduce the need for future payroll tax hikes and benefit cuts. If equity investment had begun in 1984, for example, and if equity holdings had ramped up to 40 percent of the Trust Fund portfolio, reserves at the end of 2015 would have been $3.8 trillion compared with actual holdings of just $2.8 trillion. 

A more helpful measure of the size of the reserve is the “Trust Fund ratio”—the amount of assets in the Trust Fund at the beginning of the year divided by expected Social Security payouts during the year. If equity investment had been phased in beginning in 1984, the Trust Fund ratio at year-end 2015 would have been 4.1 compared to the actual ratio of 3.1