Stock market gambles won’t fix Social Security

Cassidy-Kaine stock – A new report from the Center for Retirement Research finds that a proposal led by Senators Bill Cassidy and Tim Kaine to borrow $1.5 trillion and invest in equities is unlikely to fully repay the debt. With Social Security’s trust fund projected to cover only

The math is what finally lands.

Social Security’s reserves are on track to reach a critical tipping point in roughly seven years. After that, if lawmakers make no adjustments, the program’s trust fund would be able to pay out just 77% of benefits to seniors.

That looming shortfall has triggered familiar debate—raise payroll taxes, raise the retirement age for younger workers, or lift the cap on earnings subject to Social Security taxes, currently $184,500 in 2026.

But a different idea is getting renewed attention. A new report from the Center for Retirement Research runs the numbers on an approach pitched by Louisiana Senator Bill Cassidy and Virginia Senator Tim Kaine: have the Social Security Administration borrow heavily and invest the leveraged funds in the stock market.

The proposal would create an investment fund financed with $1.5 trillion in borrowed funds, which would then be invested in equities. Over 75 years, the government would borrow an additional $25.1 trillion to cover benefit gaps, bringing total borrowing to $26.6 trillion.

The attraction is obvious. Stocks have historically generated higher returns than the Treasury securities currently held by the Social Security trust fund. Those higher returns, in theory, could reduce the need for future tax hikes or benefit cuts.

The problem is that the returns don’t come with guarantees.

Government bonds are considered risk-free. Stocks are not. And when the researchers tested the Cassidy-Kaine plan through several simulations. the optimistic scenario still didn’t clear the debt hurdle. Even with stocks delivering a strong 6.5% real annual return over the next 75 years. the proposal would fully repay its borrowing only about 40% of the time.

Under less optimistic return assumptions, the study finds the picture gets worse—leaving the government with large amounts of debt and hefty interest payments decades down the road.

The study also points to risks beyond market performance: market volatility, political interference, and the possibility that government ownership stakes could grow large enough to affect market stability.

“It’s a gamble that does not always pay off,” the researchers wrote.

Anqi Chen, a senior research economist and co-author of the report, framed the core concern in plain terms. “It’s not that the stock market will not help,” Chen told Yahoo Finance. “It’s that borrowing to invest in the stock market will likely saddle future taxpayers with debt.”

Social Security watchdogs are making the same distinction: even if equities outperform at times, the question is whether that performance is reliably enough to close the financing gap without adding another layer of risk.

“One concern regarding Senator Cassidy’s proposal is that the financial markets are unlikely to return the level of profits needed to pay back the loans needed to establish a special Social Security fund. ” Max Richtman. president and CEO of the National Committee to Preserve Social Security and Medicare. told Yahoo Finance. “If the fund doesn’t hit its investment targets. now you have all these loans to repay as well as benefits owed to the American people.”.

Chen and the report also explore a more traditional middle ground: eliminate the 75-year borrowing deficit by raising taxes, reducing benefits, or some combination of the two, rebuilding the trust fund—and then investing a portion of assets in equities.

In that setup, the idea is that equities become an addition to a larger fix, not a replacement for it. Chen said, “Incorporating equities as part of a larger reform package could be worth it as it could be a permanent fix.”

The report adds a specific scenario: if Congress enacted an immediate tax increase (or benefit cut) that closed the long-run financing gap, then a 40% allocation to equities from the trust fund could reduce the need for future tax increases or benefit cuts.

But the timing problem remains. Chen said, “Time, however, is running out.” If lawmakers wait until 2034, diversifying Social Security investments in the stock market, while still helpful, is unlikely to be a permanent fix.

What the numbers leave readers with is a stark choice between approaches that aim to stabilize benefits with fewer assumptions, and a plan that leans on borrowing—then bets repayment on a market that can’t be controlled.

Social Security Center for Retirement Research Bill Cassidy Tim Kaine trust fund equities stock market borrowing payroll taxes retirement age earnings cap 77% benefits