Investing for a higher return. Can Social Security do better than 3%?
We can’t control what others do and we can’t stop misfortune from striking. But we can control our own actions. Those who are financially prudent will most likely enjoy success, even if events don’t always go their way.
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If Washington treats Social Security in the same way that states treat their pensions funds, then DC will find a way to overestimate the rate of returns and underfund the trust fund. Since the funding is “currently fixed”, the underfunding will come from failing to raise the social security tax when required because the politicians promise too great of a payout. But then again, there is nothing really different other than some broker is not taking millions or billions in fees from the fund now.
As an unintended consequence, how much more will the US borrowing costs go up if they lose all those guaranteed treasury bond purchases from Social Security? Will it force bond prices to go higher to get more private investment?
I guess it really doesn’t matter since Social Security will soon stop buying bonds and start cashing them in to pay benefits.
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We have had this discussion before. Yes, certainly, if the folks in DC staff it out to someone who knows what they are doing. As I said, years ago, I would invest in natural resources, domestic land and property, and precious metals used in manufacturing. Yes, taxpayers would be on the hook, but they are on the hook to pay interest on trust assets anyway, right? So, taxpayers would be guaranteeing the necessary rate of return … just as they do today. What would no longer happen would be the federal government using that money with a promise from taxpayers yet unborn to pay the interest and redeem the bonds. That is, they might have to actually reduce their level of spending – lest American taxpayers become aware of their actual, profligate, spendthrift ways.
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Local bank here offers a 5 year CD for 3%.
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