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 created to avoid the kind of catastrophe 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 trust funds purchase 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 in a similar pattern in 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 created to exactly avoid this kind of catastrophe, 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. Social Security was created in 1935 as a safety net to protect Americans from the hardships of unemployment, in addition to 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 had lost their jobs. Ordinary people had borrowed money to buy stocks because they believed they were a sure thing, and there was no safety net upon which they could fall, 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 distanced 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 challenges - higher returns would have meant that those benefits would have earned far more money, thereby keeping the coffers healthy. The second speaks to the lack of choice we have as workers to take that money and invest it in the stock market - that's done for the collective benefit. If there were a Great Depression, there would, ideally, still be Social Security.

About those two trusts: 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 a sufficient work history and earned work credits, typically 40 credits, or about 10 years of work. Trust in this trust fund is key; the trust fund ensures that Social Security can meet its obligations by holding and managing those 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 good until 2099, but once a person receiving disability insurance reaches the Full Retirement Age for Social Security, 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 lots of political maneuvers can happen between now and 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.

Related: 'We keep our finances separate': My boyfriend is in his 50s with no retirement savings - how worried should I be?

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.

More columns from Quentin Fottrell:

'I plan to exit corporate life': I'm 50 and have $400,000. My wife is a teacher. Can I retire at 55?

'This is an overlooked catastrophe': Why do so many hospitals not accept Medicare Advantage for cancer patients?

We're in our 70s with no heirs. I like donating $30,000 from our $700,000 IRA to charity - my husband disagrees. Who's right?

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-Quentin Fottrell

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April 30, 2026 09:00 ET (13:00 GMT)

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