If the Social Security fund was invested in the stock market...?

[FreeJoe]

46. It doesn't work that way

The portion of Social Security that goes into the fund (or out of it now days) is relatively small. It is primarily a transfer system from current workers to current retirees. When the income from current taxes is greater than current payments, that money gets invested in federal government bonds. When there is a shortfall, the bonds are sold back to the treasury and the money covers the shortfall.

If the surplus was invested in other instruments (stocks, private bonds, or whatever), changes in the value of the fund would not impact the amount of money paid out. If the returns were lower than the return from the bonds, we might deplete the fund earlier. Only then would benefits be cut.

To the heart of your question, though, I would not like the federal government to invest that money in private entities. I know that Calpers and other large state pension plans do and they see higher average returns than SS, but I still think it would be bad. It would be an uncomfortable political intertwining of government and private interests.