Can the stock market save Social Security? One paper says nope.

Can the stock market save Social Security? One paper says nope. Kerry Hannon · Senior Columnist Wed, May 27, 2026 at 5:00 PM GMT+7 3 min read Could investing in the stock market right the Social Security ship? A new report from the Center for Retirement Research ran the numbers. Spoiler alert: Probably not. Social Security s reserves are on track to hit a critical tipping point in roughly seven years. At that point, if no adjustments are made, the entitlement program s trust fund will be able to pay out just 77% of benefits to seniors. Lawmakers have floated a range of fixes, including raising payroll taxes, increasing the retirement age for younger workers, and lifting the cap on earnings subject to Social Security taxes, currently $184,500 in 2026. The new study examines a more unconventional proposal by Louisiana Senator Bill Cassidy and Virginia Senator Tim Kaine — to have the Social Security Administration borrow heavily and invest the leveraged funds in the stock market. “It’s a gamble that does not always pay off,” according to the researchers. The proposal would create an investment fund financed with $1.5 trillion in borrowed funds that 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 appeal is straightforward: Stocks historically generate higher returns than the Treasury securities currently held by the Social Security trust fund. Those higher returns could, in theory, reduce the need for future tax hikes or benefit cuts. The flip side, of course, is that stocks are a far riskier investment than government bonds, which are considered risk-free. The study ran several simulations and found that even if stocks deliver a strong 6.5% real annual return over the next 75 years, the Cassidy-Kaine proposal would fully repay its borrowing only about 40% of the time. Under less optimistic return assumptions, the outcome worsens considerably, leaving the government with large amounts of debt and hefty interest payments decades down the road. The researchers say the strategy comes with still more risks, including market volatility, political interference, and the possibility that government ownership stakes could become large enough to affect market stability. “It’s not that the stock market will not help,” Anqi Chen, senior research economist and co-author of the report, told Yahoo Finance. “It’s that borrowing to invest in the stock market will likely saddle future taxpayers with debt.” Social Security watchdogs agree: “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.” Another option the researchers explored is to eliminate the 75-year borrowing deficit by raising taxes, reducing benefits, or some combination of the two, which would rebuild the trust fund. Then a portion of those assets could be invested in equities. “Incorporating equities as part of a larger reform package could be worth it as it could be a permanent fix,” Chen said. If Congress were to enact 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. “Time, however, is running out,’ Chen said. “If we wait until 2034, diversifying Social Security investments in the stock market, while still helpful, is unlikely to be a permanent fix.” Kerry Hannon is a Senior Columnist at Yahoo Finance. She is a career and retirement strategist and the author of 14 books, including "Retirement Bites: A Gen X Guide to Securing Your Financial Future," "In Control at 50+: How to Succeed in the New World of Work," and "Never Too Old to Get Rich." Follow her on Bluesky and X. Sign up for the Mind Your Money newsletter Click here for the latest personal finance news to help you with investing, paying off debt, buying a home, retirement, and more Read the latest financial and business news from Yahoo Finance

Can the stock market save Social Security? One paper says nope.

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