What If Social Security Had Invested in America?

Here’s a question I had never given much thought to until recently:

Why doesn’t Social Security invest some of its money in the American stock market?

Millions of Americans invest retirement savings in stocks. Private pension funds do it. State and local government retirement systems do it.

Social Security doesn’t.

Its trust-fund reserves are invested in interest-bearing securities backed by the federal government. They are extremely safe. But Social Security consequently has not participated directly in the higher long-term returns historically produced by American equities.

That got me wondering:

What would have happened if Social Security had invested even part of its enormous reserves in American businesses?

The answer is fascinating.

The Crisis of 1983

First, some history.

President Ronald Reagan and Congress created the National Commission on Social Security Reform in 1981. It became known as the Greenspan Commission after its chairman, economist Alan Greenspan.

This wasn’t a commission studying some theoretical problem 50 years down the road. Social Security was facing an immediate financial crisis.

According to the Social Security Administration’s historical account, the Old-Age and Survivors Insurance Trust Fund was in danger of running out of money as early as August 1983.¹

The Commission concluded that between $150 billion and $200 billion in additional revenue, reduced expenditures or some combination of the two would be necessary to keep the system solvent through the remainder of the decade.²

Its recommendations formed the basis for the bipartisan Social Security Amendments of 1983 signed by Reagan.

Those reforms did something else.

They helped produce substantial Social Security surpluses as the Baby Boom generation moved through its working years. The Greenspan Commission itself anticipated that, under its intermediate assumptions, Social Security income would “significantly exceed” expenditures during the 1990s and early 2000s.³

The reserves grew into the trillions.

But those reserves weren’t invested in American stocks.

What If They Had Been?

Researchers at Boston College’s Center for Retirement Research recently ran essentially that historical experiment.

They asked what would have happened if Social Security had begun investing part of its reserves in equities in 1984, immediately after the 1983 reforms, gradually moving toward a portfolio containing 40 percent equities.

Their answer is remarkable.

At the end of 2024, the actual Social Security trust funds contained approximately $2.8 trillion.

Under the researchers’ historical equity-investment simulation, they would have contained approximately $6.2 trillion.⁴

That’s a difference of about:

$3.4 trillion.

And that result includes the 1987 market crash, the dot-com collapse, the 2008 financial crisis and the COVID-era market turmoil.

Stocks obviously didn’t go straight up.

The Social Security portfolio would have suffered substantial losses during major bear markets. But Social Security isn’t investing for next Thursday. Its financial obligations extend across generations.

Over that much longer period, equities historically produced substantially higher returns than Treasury securities.

This Wasn’t Just Hindsight

Perhaps most interestingly, people in Washington actually considered doing something very similar.

The 1994–96 Social Security Advisory Council examined investing part of the trust funds in private equities.

And they weren’t proposing that politicians sit around a table picking stocks.

The Council discussed a passive investment strategy based upon a broad U.S. stock-market index, much like large pension funds use.⁵ One version subsequently described indexes such as the Russell 3000 or Wilshire 5000 and contemplated eventually putting about 40 percent of accumulated Social Security funds into equities.⁶

So why didn’t we do it?

There were legitimate objections.

Alan Greenspan was one of the most important critics.

His argument wasn’t simply that stocks sometimes go down.

Greenspan argued that having the government exchange Treasury securities for corporate stocks wouldn’t magically create additional national wealth. Unless the policy increased national saving, much of the transaction would amount to changing who owned stocks and who owned government bonds.⁷

That’s an important qualification.

The Boston College calculation showing a $3.4 trillion larger Social Security trust fund does not mean America as a whole necessarily would have been $3.4 trillion richer.

Greenspan also worried about something anyone familiar with Washington should understand:

Politics

Imagine the federal government controlling hundreds of billions — eventually trillions — of dollars in corporate stock.

Would politicians leave it alone?

Would Congress eventually decide that Social Security shouldn’t invest in oil companies? Gun manufacturers? Tobacco companies? Companies without the “right” environmental policies? Companies accused of unfair labor practices?

Members of the Social Security Advisory Council raised exactly that concern. They warned that even if Congress initially required passive index investing, no Congress could permanently bind a future Congress against politically motivated changes.⁸

That’s a serious argument.

But proponents believed safeguards could be constructed. In 1999, the Clinton administration proposed limiting Social Security equity holdings to about 15 percent of trust-fund assets, using independent professional management and restrictions intended to insulate investment decisions from political interference.⁹

Congress never adopted it.

And Here We Are

According to the 2026 Social Security Trustees Report, the combined Old-Age and Survivors Insurance and Disability Insurance trust funds ended 2025 with approximately $2.56 trillion in reserves.

Those combined reserves are projected to be depleted in 2034.

If Congress does nothing, continuing Social Security revenue at that point would be sufficient to pay about 83 percent of scheduled benefits.¹⁰

Investing part of Social Security’s reserves in stocks would not have eliminated that underlying problem.

Social Security faces a structural imbalance between the benefits promised and the revenue expected to finance them. No investment strategy makes that disappear.

And stock investing involves real risk.

But the historical question remains difficult to ignore.

The Baby Boom retirement was not a surprise. The government deliberately accumulated substantial reserves in anticipation of it.

At the same time, American businesses were creating enormous amounts of wealth.

Social Security largely remained on the sidelines of that growth.

Maybe that was the correct decision. Greenspan’s economic objections deserve to be taken seriously, and the danger of politicians eventually meddling with a government-controlled stock portfolio is hardly imaginary.

But we now have more than four decades of history to examine.

And researchers looking backward find that a Social Security trust fund partially invested in American equities beginning after the 1983 reforms could have been trillions of dollars larger today.

So perhaps the question isn’t:

“Why didn’t Washington gamble Social Security on the stock market?”

Nobody was proposing that.

The better question is:

Why didn’t we prudently diversify a portion of the retirement reserves of millions of American workers into the same American economy that created so much wealth for everybody else?

More than forty years after the Greenspan reforms, that’s a question worth asking.