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Provisions Affecting Trust Fund Investment in Marketable Securities
|Present law trust fund investment holdings||
These provisions would prescribe that a portion of the Social Security trust funds be invested in marketable securities (e.g., equities, corporate bonds), rather than 100 percent total investment in special-issue government bonds, as under current law. We provide a summary list of all options in this category. For each provision listed below, we provide an estimate of the financial effect on the OASDI program over the long-range period (the next 75 years) and for the 75th year. In addition, we provide graphs and detailed single year tables.
The selections G3 and G5 provide a low-yield or risk-adjusted perspective where equity yields are taken to be equal to the average real yield on long-term Treasury bonds. Thus, these selections have no effect on the estimated actuarial balance of the OASDI program. Many analysts believe the higher expected return for equities should not be included in valuations because the tendency for higher average returns is in effect compensation for the higher volatility in equities. The low or risk-adjusted yield assumption reflects this perspective.
All estimates are based on the intermediate assumptions described in the 2010 Trustees Report. Choose the type of estimates (summary or detailed) from the list of provisions.
|Number||Table and graph selection|
|G1||Invest 40 percent of the Trust Funds in equities (phased in 2011-2025), assuming an ultimate 6.4 percent real rate of return on equities.|
|G2||Invest 40 percent of the Trust Funds in equities (phased in 2011-2025), assuming an ultimate 5.4 percent real rate of return on equities.|
|G3||Invest 40 percent of the Trust Funds in equities (phased in 2011-2025), assuming an ultimate 2.9 percent real rate of return on equities, the same as the assumed ultimate yield on the special-issue Social Security trust fund bonds.|
|G4||Gradually invest 15 percent of OASDI trust fund assets in a broad index of equity market securities (such as the Wilshire 5000), assuming an ultimate 6.4 percent annual real rate of return on equities. Increase the portion in equities by 1.5 percent each year 2011 through 2020. Maintain the percentage at 15 percent thereafter.|
|G5||Invest 15 percent of the Trust Funds in equities (phased in 2011-2020), assuming an ultimate 2.9 percent annual real rate of return on equities, the same as the assumed ultimate yield on the special-issue Social Security trust fund bonds.|
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Last reviewed or modified February 04, 2011