MW 'The numbers don't lie': If I had invested my Social Security in the S&P 500 I'd have $4 million. Is the system broken?
By Quentin Fottrell
'I do better than many citizens because I've contributed at the highest level'
Social Security was designed to avoid the kind of economic devastation that occurred during the Great Depression. (Photo subject is a model.)
Dear Quentin,
If all my contributions, along with my employer's contributions, had been invested in the S&P 500, my balance would be more than $4 million. I could take a very sustainable withdrawal rate of approximately $30,000 a month, assuming my long-term returns were 7%-8%.
If only my contributions were invested in the S&P 500 SPX, while my employer contributions went to the government, I'd have close to $3.7 million in the account at the end of this year, based on historical averages. I do better than many citizens because I've contributed at the highest level.
I am 64 years old. It's sobering, isn't it? The last president to make a serious attempt at privatizing Social Security was George W. Bush. We all know it's the proverbial "third rail" of politics, but that reluctance may be to our own detriment. The numbers don't lie.
Why invest in Social Security when the markets would be far more lucrative?
Retiree
Related: I'm trying to fix my relationship with my stepdaughter. Should my husband and I tell her how we have divided our assets?
You can email The Moneyist with any financial and ethical questions at qfottrell@marketwatch.com. The Moneyist regrets he cannot reply to questions individually.
Social Security was created to avoid this kind of catastrophe that occurred during the Great Depression.
Dear Retiree,
The reason is a four-letter word: risk.
Social Security benefits are invested almost entirely in special U.S. Treasury securities created specifically for these programs. The money is held in the Old-Age and Survivors Insurance Trust Fund and the Disability Insurance Trust Fund. These funds invest in special-issue Treasury bonds from the Department of the Treasury. These bonds are backed by the U.S. government. In theory, they are extremely low-risk.
While stocks have historically delivered higher returns, they also carry greater risk. The stock market has hit new highs in 2026. With this growth comes confidence, and with confidence comes, well, folly. Your theory assumes that past equity returns will persist into the future. For example, it's fair to argue that the U.S. narrowly avoided another Great Depression during the COVID-19 pandemic, when businesses shut down and people stayed home.
Social Security was designed to exactly avoid this kind of calamity, which would lead to homelessness, poverty and hunger, as it did in the 1930s. You are trading those theoretical paper returns - had your money been invested in the stock market - for peace of mind and security. The clue is in the name. The Social Security program launched in 1935 as a safety net to protect Americans from the hardships of unemployment, as well as old age and disability.
By the early 1930s, the U.S. was in the grip of a catastrophic economic collapse. Millions of Americans had lost their life savings and their jobs. Ordinary people had borrowed money to buy stocks because they believed they were a sure thing, and there was no safety net to fall back on-except the cold, hard asphalt of the streets. Until then, people who had fallen on hard times had, for the most part, relied on family and community.
Unlike many European welfare systems of the era, the Social Security Act of 1935 relied on payroll contributions rather than tax revenues. This was a cultural and practical decision. By connecting benefits to contributions, this insurance was pitched as something earned by workers rather than given to them for free. For Americans who grimace at the thought of "big government," this helped distance Social Security from public assistance or welfare.
Stocks offer greater returns - and risk
There are two challenges facing Social Security over the next decade. The first relates to funding-higher returns would have meant those benefits generated more income, thereby keeping the coffers healthy. The second concerns the lack of choice workers have to invest that money in the stock market-it is managed collectively. If there were a Great Depression, there would, ideally, still be Social Security.
About those two funds: The Old-Age and Survivors Insurance Trust Fund pays monthly Social Security retirement benefits to eligible retired workers and their families. Eligibility is tied directly to a worker's history and requires sufficient work credits-typically 40, or about 10 years of employment. Confidence in this system is essential, as it ensures Social Security can meet its obligations by holding and managing payroll taxes.
The Social Security Disability Insurance program, on the other hand, is a federal, payroll-tax-funded insurance program that provides cash benefits to disabled workers and their eligible dependents. Both OASI and SSDI are funded primarily through payroll taxes under the Federal Insurance Contributions Act and the Self-Employment Contributions Act, which also support benefits for retirees and disabled workers, as well as their survivors.
The Social Security Disability Insurance Trust Fund is projected to remain solvent until 2099, but once a person receiving disability insurance reaches full retirement age, their benefits are paid out of the OASI fund. It's projected that the OASI fund will be insufficient to pay full benefits in 2033. So those who transfer may also be impacted when the time comes, but many political changes could occur before then.
Just like a civilization that had taken peace for granted, the Great Depression revealed the fragility of the entire economic system. In response to the dire economic consequences of the 1929 Wall Street Crash, President Franklin D. Roosevelt and his administration quickly realized that, when they got the country back on its feet again, Americans desperately needed a permanent national system of social insurance.
That's the long answer to your $4 million question.
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By emailing your questions to The Moneyist or posting your dilemmas on The Moneyist Facebook group, you agree to have them published anonymously on MarketWatch.
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-Quentin Fottrell
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May 01, 2026 15:12 ET (19:12 GMT)
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