One of the biggest reasons I love the stock market has nothing to do with making money.
I love ownership. I’ve watched it change people.
Give someone a tiny piece of a business, even if it’s just a handful of stock options or a small equity stake, and something changes.
They stop thinking like an employee and start thinking like an owner. They care a little more. They root for the company differently. They celebrate the wins because they’re sharing in them.
I’ve seen it happen over and over again.
So that got me thinking about something I’ve never really heard anyone talk about.
Social Security.
Not because I think I’m some expert on Social Security. I’m definitely not. In fact, I’m writing this because I have more questions than answers.
That’s usually how these Everybody’s Wrong posts begin anyway. Something doesn’t quite add up, and I can’t stop thinking about it.
Today, the Social Security Trust Fund holds about $2.6 trillion. Almost all of it is invested in special U.S. Treasury securities.
In simple terms, hard-working Americans have spent decades lending money to the government.
Over that time, the Trust Fund earned only a fraction of what it would have earned in the U.S. stock market.
That wasn’t some terrible mistake.
When Social Security was created in the 1930s, America had just lived through the Great Depression.
The stock market had collapsed. Banks were failing. Government bonds felt safe. Stocks looked dangerous.
If you put yourself in their shoes, the decision makes perfect sense.
But we’re almost 90 years removed from that world.
And I can’t help but wonder what would have happened if, instead of lending all that money to the government receiving a tiny yield, Social Security had quietly spent the last several generations buying tiny pieces of American businesses.
Ownership Changes Everything
Imagine if a small part of every paycheck had been invested in the American stock market for generations.
Not trying to beat the market. Not hiring superstar fund managers. Not guessing which company would become the next Nvidia (NVDA).
Just buying the whole market and letting American businesses do what they’ve always done: Compete, innovate, and grow.
Today, the entire U.S. stock market is worth roughly $75 trillion. The Social Security Trust Fund holds about $2.6 trillion.
If those assets had been invested in a broad stock market index instead of Treasury securities, the Trust Fund would already own roughly 3% to 4% of Corporate America.
Think about that for a second. Millions of workers wouldn’t just be paying into a retirement program.
They would collectively own a meaningful slice of the businesses they shop at, work for and depend on every day.
To me, that’s a completely different way of thinking about retirement. Ownership changes behavior. Maybe it changes countries, too.
The more interesting question is what could have happened if we had started much earlier.
Suppose policymakers had decided 50 years ago to invest just 10% of Social Security’s growing reserves in a simple index fund while leaving the other 90% in Treasury securities.
Would the Trust Fund be worth more than $2.6 trillion today? It seems reasonable to think so.
What if the allocation had been 25%? Or even 50%? We can never know exactly how history would have unfolded.
But after decades of contributions, dividends, and compounding, it’s not hard to imagine a Trust Fund worth many trillions more than it is today, owning a meaningful percentage of Corporate America.
Norway used its national savings to buy pieces of the world’s businesses. America used Social Security’s savings to lend money back to its own government and was rewarded with an embarrassingly low yield.
Said another way, Norway invested in companies. America bought government IOUs.
Now, imagine taking this idea one step further.
With a few adjustments, the Social Security Trust Fund could become one of the largest institutional investors in the world.
Every paycheck would create another buyer. Every contribution would add liquidity.
Every generation of workers would own a little more of the businesses driving the American economy.
I’m not saying Social Security should be 100% invested in stocks. Far from it.
Maybe the better question is, what should Americans own while they’re saving?
The Clock Is Ticking
Here’s why I started thinking about this now.
The Social Security Trust Fund isn’t growing anymore.
It’s shrinking.
The system is paying out more in benefits than it’s collecting through payroll taxes, so each year it has to draw down some of its reserves.
Unless Congress changes the law, those reserves are projected to be depleted in the early 2030s.
Social Security won’t disappear after that because payroll taxes will continue to fund most benefits. But there won’t be a growing pool of assets left to compound for future retirees.
That makes me wonder whether the biggest opportunity may already be behind us.
Maybe there was a world where some portion of those reserves quietly compounded alongside the growth of American businesses for 50 or 60 years. Maybe there still could be.
If Congress eventually reforms the system and allows future reserves to be invested, what should the goal be?
Should Social Security eventually own 2% of the stock market… 5%… 10%…
I honestly have no idea what the right number is.
Norway’s sovereign wealth fund has become one of the world’s largest investors simply by buying businesses and holding them for the long run.
America has the deepest and most successful capital market on Earth.
It’s at least worth asking what role ownership should play in the retirement system that tens of millions of Americans rely on.
I’m Just Asking the Question
This isn’t a proposal.
It isn’t politics. It isn’t me pretending to know how Social Security should be run. There are real concerns that would have to be addressed.
How much influence should the government have over public companies? How would those shares be voted? Would politicians eventually interfere?
Those are fair questions. But here’s another one.
If we’re trying to help Americans retire with dignity, shouldn’t we at least ask whether they should also own a bigger piece of the economy they’ve spent their entire lives building?
Everybody debates how to divide the pie.
I find myself wondering whether we’ve spent almost 90 years overlooking a much simpler idea.
Maybe more Americans should have owned a bigger piece of it.
Stay sharp,
JC Parets, CMT
Founder, TrendLabs