Social Security and Equities: Lessons from Railroad Retirement

The brief’s key findings are:

• Some have advocated investing Social Security trust fund assets in equities.

• A similar proposal adopted by the railroads in 2001 suggests two key hurdles: political risk and financial risk.

• For political risk, the railroads created an independent trust; a better fit for Social Security might be to limit investments to index funds.

• For financial risk, the railroads set up an automatic mechanism to respond to shocks; Social Security would need a similar mechanism.