![]() ![]() While the Social Security Trust fund itself would not have invested in equities, eligible workers would have had the flexibility to invest their own accounts in many different assets. Bush proposed allowing younger workers to invest some of their Social Security taxes in personal retirement accounts. The last time the idea of investing social insurance in equities got any airing was in 2005, when President George W. Over the long run, a well-balanced portfolio of stock and bonds can outperform bonds with relatively little additional risk. But as we have seen over the past year, when interest rates rise, older bonds that pay relatively low rates of interest can lose a lot of their value. For example, over the past half century, stocks have generated an average annual return of about 11.73% while Treasury bonds have returned about only 6.59%.īonds generally are less volatile than stocks and overall carry less risk. ![]() Stocks are attractive because over the long run investment returns are far higher than for bonds. Public pensions have invested even more in stocks, about 47% in 2019, according to the Pew Charitable Trusts. The comparison is not perfect, but typically corporate pension funds invest about one-third of their assets in publicly-traded stocks, about half in bonds (including corporate debt), and the rest in a mix of real estate, private equity and other alternative investments, according to the consulting firm wtw. And to keep taxes low, most members of the California commission seem willing to accept the increased risk of some equity investments. Just as the price for lower investment returns is higher premiums for private insurance, the price is higher taxes for a public program. ![]()
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