Social Security surely needs more than risky wagers

I have been a pension nerd since I was 20 years old. So I have been hearing for literally decades that there is a simple, magical solution to all our retirement funding problems: Just take more risk! When the investments pay off, the coffers will be replenished and all will be well.

- Allison Schrager, Tribune News Service

Now two US senators, Republican Bill Cassidy of Louisiana and Democrat Tim Kaine of Virginia, have offered a bipartisan proposal to create a separate fund for Social Security, whose existing trust fund can invest only in US government bonds. The new fund would be allowed to invest “in stocks, bonds and other investments that generate a higher rate of return.”

There is some merit to their idea. But make no mistake: This would be a huge leveraged bet on behalf of the taxpayer. And— spoiler alert —taking risks doesn’t always work. Many public-sector pensions are underfunded, despite their ability to invest in a market that has seen some pretty stellar returns over the last 20 years. There's little doubt Social Security is facing a difficult decade. In 2033, the existing trust fund is expected to run out of money. So the government must cut benefits, raise taxes or issue more debt to make up the shortfall — which will amount to $25.1 trillion, the Social Security administration estimates.