Social Security Funds To Invest In Equities?April 22, 2017 / by Sonny Dothard
The recent article in the Wall Street Journal suggesting that allowing Social Security funds to invest in equities could increase the investment returns. The article suggested that this move could improve the long-term financial outlook of the Social Security Trust Fund while reducing the need for tax increases. The risks here are estimated to be negligible if it is done carefully and even if the future returns of the equity are turned out to be lower than the historical ones.
Also, allowing Social Security funds to invest in equities is unlikely to disrupt the stock market as the simulations suggest that the trust funds will unlikely to hold more than 2 percent of the outstanding market cap at the last stage of the projection period. If the stock accounted for more than 40 percent of the total security assets, then we can say that the % of the trust fund would likely to increase in the stock market by 2 to 3 %. The social security with the thrift savings plan withdrawals options would not take over the stock market.
Does The Thrift Savings Plan’s Success Justify Allowing Social Security Funds To Invest In Equities?
Today the critics of the equity investment suggest that Social Security ownership of publically traded shares would could create a conflict of interest for Congress as the Federal Government would become an owner of these companies and therefore have Voting rights on how the Companies were run. But at the same time, any risk of this kind can be easily avoided. The equity investments in consideration are designed primarily to address the broad market indexes’ such as Wilshire 5000 and S&P 500. Apart from that the voting rights of trust fund shares can be handled in 3 ways: by casting votes reflecting the votes of common shareholders, by no voting at all or at last by delegating the individual portfolio managers. These are the standard practices of the federal government’s Thrift Savings Plan.
The equity investment today is not a silver bullet which can resolve all Social Security issues, but at the same time allowing Social Security funds to invest in equities could t the tsp considerations of yours in your packaged plan for the restoration of balance. The moral of the story is that the policy makers should include some investment assets in their equities as options so that when they implement the thrift savings plan, they will construct the comprehensive packages for the long term run balance restoration. There are many thrift savings withdrawals options are available for you to choose in terms of better investment & beneficial growth for your retirement.