Reply #95: I have to disagree with you. Your original surmise was stronger than you may know for two reasons: [View All]

[TacticalPeek]

How Are the Trust Funds Invested?


The Social Security trust funds are invested entirely in U.S. Treasury securities. Like the Treasury bills, notes, and bonds purchased by private investors around the world, the Treasury securities that the trust funds hold are backed by the full faith and credit of the U.S. government. The U.S. government has never defaulted on its obligations, and investors consider U.S. government securities to be one of the world’s safest investments.

The Treasury securities held by the trust funds have some special features that make them even more attractive investments than other Treasury securities. First, the trust funds’ investments do not fluctuate in value and can always be redeemed at par. Even if the securities must be redeemed early, Social Security is guaranteed not to lose money on its investment. Second, all of the securities purchased by the trust funds — even short-term securities that will mature in one or two years — earn interest at the same rate as medium- and long-term Treasury securities (those not due or callable for at least four years).

By the end of 2009, the trust funds had accumulated over $2.5 trillion worth of Treasury securities, earning an average interest rate of 4.9 percent during that year. The annual report of Social Security’s board of trustees lists the specific securities owned by the trust funds, their maturities, and interest rates. The trustees project that the trust funds will earn $118 billion in interest income in 2010.

http://www.cbpp.org/cms/index.cfm?fa=view&id=3299

I invite anyone in the investor class to try to show how that is not a sweet deal for the trust fund.