Latest news with #SocialSecurityTrustFund
Newsweek
6 days ago
- Business
- Newsweek
Americans Are Confused About How Social Security Works: Poll
Based on facts, either observed and verified firsthand by the reporter, or reported and verified from knowledgeable sources. A new poll has found there is widespread confusion among Americans about the fundamentals of Social Security—the cornerstone of retirement income for millions in U.S. Over half of respondents (55 percent) in the Cato Institute's August 2025 Social Security Survey, conducted by Morning Consult with 2,200 Americans, said that they do not know how the retirement benefits system is funded, despite its central role in retirement planning. Forty-five percent of those surveyed correctly noted that today's workforce pays Social Security taxes that fund benefits for current retirees and that future workers will do the same for their generation. Nearly a quarter (23 percent) said they mistakenly believe that their Social Security taxes are saved in a personal account that is exclusively for them, while 32 percent said they don't know how the system is financed at all. When it comes to how benefits are calculated, there is also some confusion. While 60 percent said they recognize that workers who pay more into Social Security receive larger benefits, 15 percent incorrectly think that all retirees get the same amount and another 25 percent said they are unsure. When it comes to the scale of Social Security benefits, there is still a significant knowledge gap. An overwhelming 91 percent of respondents were unaware that the maximum annual benefit can reach $60,000 per year. The average monthly benefit is $2,005.05 as of June 2025—netting just over $24,000 a year before any taxation. However, only 25 percent correctly estimated that the average benefit falls between $20,000 and $29,000 per year. Meanwhile, 38 percent underestimated the average benefit amount, 17 percent overestimated it, and 19 percent said they were unsure. A Social Security card with U.S. Dollars. A Social Security card with U.S. Dollars. GETTY How Is Social Security Funded? Social Security operates on a "pay-as-you-go" system funded primarily through payroll taxes collected under the Federal Insurance Contributions Act (FICA). Workers and their employers each contribute 6.2 percent of wages, up to a taxable earnings cap ($168,000 in 2025), which goes into the Social Security Trust Fund. These funds are then used to pay monthly benefits to current retirees, survivors and disabled beneficiaries. The program is designed so that today's workers essentially fund the benefits of today's retirees, with the expectation that future workers will do the same for them when they retire. Funding of Social Security has often been considered a "third rail" issue in American politics, meaning that targeting it for notable cuts or changes could be politically perilous to members of either party. The program is expected to run out of funds in the coming years if no action is taken by Congress. According to the latest Social Security Trustees report, the program's two trust funds—the Old-Age and Survivors Insurance (OASI) and Disability Insurance (DI) funds—are projected to reach insolvency by 2034. If no solution is found, benefits would rely entirely on incoming payroll taxes, resulting in shortfalls of approximately 21 percent. This is not the first time Social Security has faced a financial cliff. In the early 1980s, the trust funds also approached insolvency. In response, Congress enacted a series of reforms, including accelerating payroll tax hikes, gradually increasing the retirement age, and taxing a portion of Social Security benefits.
Hindustan Times
11-07-2025
- Business
- Hindustan Times
Cassidy-Kaine's bipartisan push to invest Social Security funds in stocks, bonds gains momentum
In an effort to prevent the looming insolvency of Social Security, Republican Senator Bill Cassidy and Democrat Senator Tim Kaine have introduced a bipartisan proposal to restructure how the Social Security Trust Fund is managed, one that could dramatically change how Americans' retirement benefits are funded. Currently, the Trust Fund is limited by law to investing in low-yield Treasury bonds. Why the change is being proposed According to Newsweek, the Social Security Trust Fund, which pays retirement benefits to millions of Americans is projected to become insolvent by 2034, according to Treasury estimates. If no action is taken, beneficiaries could see a payment cut by 23 per cent which could trigger financial distress for senior dependents on these payments for everyday living. ALSO READ: Social Security: Why beneficiaries may receive reduced payments from July 2025 Currently, the Trust Fund is limited by law to investing in low-yield Treasury bonds. Cassidy argues this strategy is outdated and unable to keep pace with growing retirement demands. The Newsweek report quoted Cassidy stating in a CNBC interview saying that the US administration is losing money on these bonds at the moment. Cassidy added, 'We propose a separate fund…invested in the US economy which will generate better returns.' Details of the Cassidy-Kaine proposal The senators' plan, the report added, outlines a comprehensive strategy for a $1.5 trillion investment fund to be established over a period of 10 years. The fund is designed to have a 75-year holding period which allows it to mature before any withdrawals can be made. The fund aims to invest in a diversified portfolio which includes stocks, bonds, and other financial instruments thereby ensuring a broad range of investment opportunities. Importantly, the fund will operate independently from the existing Social Security Trust Fund. ALSO READ: Monthly social security checks could be cut by this year if Congress doesn't act The overarching goal of Cassidy-Kaine proposal is to emulate the successful models of state pension funds and international systems which have demonstrated the ability to achieve higher returns over time. Experts' opinion on Cassidy-Kaine proposal The Newsweek report quoted experts saying that the proposal is bold but not without risks. Alex Beene, financial literacy instructor at University of Tennessee, told the publication that it wasn't the first idea of its kind but 'it's exactly the type of creative thinking Congress needs'. While Kevin Thompson, CEO of 9i Capital Group, cautioned that the proposal sounds good in theory, however any move from Treasuries to riskier assets must be 'backed by strong modeling and risk analysis'. Though Treasury yields are higher now than in past years, critics said introducing equities into the mix could increase volatility and political resistance. What's next for the proposal Although the Cassidy-Kaine proposal has not been formally introduced in Congress, both senators are urging swift action. In a recent Washington Post op-ed the duo warned that waiting too long could lead to difficult and preventable consequences. FAQs Q: What is the Cassidy-Kaine proposal for Social Security? A: It's a bipartisan plan to create a $1.5 trillion investment fund to support Social Security, using higher-yield assets like stocks and bonds. Q: Why is Social Security at risk? A: By 2034, the Social Security Trust Fund may run out of money to pay full benefits due to demographic shifts and low investment returns. Q: How would this new fund work? A: The fund would invest in a diversified portfolio and be held for 65–75 years. Returns would be used to supplement the existing trust fund. Q: What's at stake? A: Without reforms, retirees could see benefit cuts of up to 23 per cent by 2034. The proposal aims to avoid that outcome without raising taxes.
Newsweek
09-07-2025
- Business
- Newsweek
New Plan Proposed To Save Social Security
Based on facts, either observed and verified firsthand by the reporter, or reported and verified from knowledgeable sources. Newsweek AI is in beta. Translations may contain inaccuracies—please refer to the original content. A bipartisan pair of senators have floated a bold new solution to the insolvency crisis facing Social Security, which they say could save the program within a decade. In a recent op-ed for The Washington Post, Republican Senator Bill Cassidy and Democratic Senator Tim Kaine announced a proposal to set up an alternative funding model for the safety net program, which would supplement the program's Trust Fund with a new diversified pool of investments. Why It Matters The potential depletion of the Social Security Trust Fund has long been an issue of concern on Capitol Hill. A recent report from Social Security Administration warned that the program "continue[s] to face significant financing issues," and estimated that the Old-Age and Survivors Insurance fund would only be able to cover "100 percent of total scheduled benefits until 2033." Insolvency would not mean that the program stops altogether, though future payments would become entirely reliant on what is collected in payroll taxes each year. This could fail to cover the entirety of scheduled benefits and possibly could result in cuts or increased taxes being needed for the program. Senator Tim Kaine speaks at a press conference at the U.S. Capitol on April 2, 2025, in Washington, D.C. Senator Bill Cassidy speaks to reporters at the U.S. Capitol on March 11, 2025. Senator Tim Kaine speaks at a press conference at the U.S. Capitol on April 2, 2025, in Washington, D.C. Senator Bill Cassidy speaks to reporters at the U.S. Capitol on March 11, 2025. Kevin Dietsch /What To Know The two senators, who have in the past advocated for various reforms of the embattled Social Security program, unveiled their new plan publicly on Tuesday. The pair said this proposal would preserve full benefits for Americans while aiming to address the program's critical funding shortfall. Their proposal centers on creating a new, parallel investment fund for Social Security, invested in a blend of "stocks, bonds and other investments that generate a higher rate of return, helping keep the program from running dry." The senators estimate that the fund would require an up-front federal investment of $1.5 trillion, and propose that it be given 75 years to grow. "The Treasury would temporarily shoulder the burden of providing benefits to Social Security beneficiaries — but when the new fund's 75 years are up, it would pay the Treasury back and supplement payroll taxes to help fill the future gap," they wrote. The Social Security Trust Fund holds surplus funds collected from payroll taxes, and is currently required to invest these in nonmarketable Treasury bonds. However, as the two senators noted, payroll taxes themselves are insufficient to sustain the program, and these bonds have persistently yielded meager returns when compared to the wider market and the securities that would be incorporated in their additional fund. Treasury bonds of the type the Social Security Trust Fund currently invests in have grown by a little over 100 percent since 2002, while the S&P 500 has risen some 600 percent over the same period. As the pair note, a growing number of Americans are concerned about the insolvency of Social Security. According to a May survey by DepositAccounts, 59 percent of nonretired Americans worry that the program won't be available to them by the time they retire. As a result of these threats, similar alternatives to the traditional funding model have recently been proposed by those in the capital markets sector. In March, BlackRock CEO Larry Fink advocated for allowing Americans to place a portion of their Social Security taxes into private accounts which would allow for higher returns. He likened this to Australia's "superannuation" program, where employers pay a portion of an employee's earnings into a fund which is then invested on their behalf. In their recent article, the two lawmakers noted that many nations use similar strategies to fund retirement programs, and referenced the National Railroad Retirement Investment Trust (NRRIT), created by Congress in 2001, as evidence that these investment strategies have worked reliably for other federal programs in the U.S. According to its most recent annual report, the NRRIT produced an investment return of 18.9 percent in fiscal 2024, though this was below its benchmark of 21.1 percent. "The trust has remained firmly in the black, with returns even exceeding expectations at some points and with payments consistently remaining reliable and on schedule," Kaine and Cassidy wrote. Gopi Shah Goda, senior fellow for economic studies and director of the Retirement Security Project at the Brookings Institution, said that while the plan does address the financial shortfall facing Social Security, it does not take aim at the "structural imbalances" which weigh on its funds. "The program can be made more progressive by slightly reducing benefit growth rates for higher-income retirees, many of whom live longer and collect more from the program," she told Newsweek. "In addition, increasing the number of working years used to calculate benefits would help reduce the program's shortfall while also improving incentives to work at older ages." "Borrowing funds in the way the proposal suggests would likely raise interest rates and slow growth," she added, "and avoids the difficult but important work of modernizing the program so that it continues to provide important protection to seniors in a sustainable manner." Devin Carroll, owner and lead adviser at Carroll Advisory Group and founder of retirement education platform Social Security Intelligence, told Newsweek that the Trust Fund running out would result in "across-the-board benefit cuts." However, Carroll added that, given the fund is almost depleted, "the main problem now is we don't really have the money to invest." "We could rebuild it by raising taxes or borrowing, but that's a heavy lift politically," he said. "Honestly, this kind of move would've made more sense a decade or two ago when we had more room to work with." What People Are Saying Senators Bill Cassidy and Tim Kaine, in their op-ed for The Washington Post, wrote: "There is a nationwide appetite to implement a bipartisan, commonsense plan like ours." They added that no one on Social Security would see "any change" to benefits as a result of the plan, and pledged to embed safeguards such as annual audits to prevent misuse of the new fund. Gopi Shah Goda of the Brookings Institution told Newsweek that while the proposal "While this proposal makes efforts to address the current financial shortfall by infusing the system with an additional investment fund that is invested in stocks, bonds and other investments, it does so in a way that does not tackle the structural imbalances in the program and introduces new risks to the funding structure." "A sensible package of reforms would change the benefit formula to better target assistance, taking care to protect the most vulnerable beneficiaries," she added. Devin Carroll, owner and lead adviser at Carroll Advisory Group, told Newsweek: "It's a smart idea on paper. Stocks usually earn more than government bonds, so adding equities to the mix could ease the need for big tax hikes or cutting benefits. But there's a trade-off. More return means more risk, and it raises questions about how involved the government might get in the private markets." What Happens Next? Cassidy and Kaine have not yet formally submitted their plan for Congressional consideration. The pair said that waiting until the Social Security Trust Fund nears insolvency could result in "difficult and preventable consequences."
Yahoo
09-07-2025
- Business
- Yahoo
Cassidy, Kaine propose new funding trust for Social Security
Sens. Bill Cassidy (R-La.) and Tim Kaine (D-Va.) proposed a new method to account for the expected lapse in the Social Security Trust Fund. A June report from the program's Old-Age and Survivors Insurance (OASI) fund would only be able to cover '100 percent of total scheduled benefits until 2033,' while the Disability Insurance (DI) trust fund is estimated to be able to pay '100 percent of total scheduled benefits through at least 2099.' However, Cassidy and Kaine say trust fund investments should be diversified in order to maintain the available Social Security benefits. 'We propose creating an additional investment fund — in parallel to the trust fund, not replacing it — that would be invested in stocks, bonds and other investments that generate a higher rate of return, helping keep the program from running dry,' Cassidy and Kaine wrote in a Tuesday op-ed for The Washington Post. The two estimate that it would take a $1.5 trillion up-front investment into the fund to get it going, while suggesting the Treasury fund the accounts for 75 years. 'The Treasury would temporarily shoulder the burden of providing benefits to Social Security beneficiaries — but when the new fund's 75 years are up, it would pay the Treasury back and supplement payroll taxes to help fill the future gap,' the senators said. Cassidy and Kaine said their program would work, citing the National Railroad Retirement Investment Trust, which was created by Congress in 2001 and successfully provided retirement benefit payouts for railroad workers. 'The trust has remained firmly in the black, with returns even exceeding expectations at some points and with payments consistently remaining reliable and on schedule,' the lawmakers said. 'Our proposal is also consistent with virtually every other pension plan — state and private — currently operating in our country, and it matches the strategy most nations use to fund their retirement programs,' they added. Copyright 2025 Nexstar Media, Inc. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.
Yahoo
09-07-2025
- Business
- Yahoo
Cassidy, Kaine propose new funding trust for Social Security
Sens. Bill Cassidy (R-La.) and Tim Kaine (D-Va.) proposed a new method to account for the expected lapse in the Social Security Trust Fund. A June report from the program's Old-Age and Survivors Insurance (OASI) fund would only be able to cover '100 percent of total scheduled benefits until 2033,' while the Disability Insurance (DI) trust fund is estimated to be able to pay '100 percent of total scheduled benefits through at least 2099.' However, Cassidy and Kaine say trust fund investments should be diversified in order to maintain the available Social Security benefits. 'We propose creating an additional investment fund — in parallel to the trust fund, not replacing it — that would be invested in stocks, bonds and other investments that generate a higher rate of return, helping keep the program from running dry,' Cassidy and Kaine wrote in a Tuesday op-ed for The Washington Post. The two estimate that it would take a $1.5 trillion up-front investment into the fund to get it going, while suggesting the Treasury fund the accounts for 75 years. 'The Treasury would temporarily shoulder the burden of providing benefits to Social Security beneficiaries — but when the new fund's 75 years are up, it would pay the Treasury back and supplement payroll taxes to help fill the future gap,' the senators said. Cassidy and Kaine said their program would work, citing the National Railroad Retirement Investment Trust, which was created by Congress in 2001 and successfully provided retirement benefit payouts for railroad workers. 'The trust has remained firmly in the black, with returns even exceeding expectations at some points and with payments consistently remaining reliable and on schedule,' the lawmakers said. 'Our proposal is also consistent with virtually every other pension plan — state and private — currently operating in our country, and it matches the strategy most nations use to fund their retirement programs,' they added. Copyright 2025 Nexstar Media, Inc. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.
