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How An Economic Crash Can Effect Social Security

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    Curious if anyone here can answer this from an economic standpoint.. how will an economic/market crash effect Social Security? I guess the logical way to think about it is how did the financial crisis of 2006-2008 effect Social Security just a few years ago? Did the country see a spike on retirees claiming benefits early, either because they had to or to hedge their bet in case their 401(k) really did tank to nothing?

    I'm wondering what it will look like for Social Security if and when the US experiences another market crash. With so many folks' retirement tied up in the stock market in one way or another, do you think if we see a prolonged crash of some kind (that many consider is coming, its just a matter of when) that programs like SS will be relied heavily on, almost like a version of the 1920's bank runs? Or is the system set up in a way that SS can't be hit too adversely, even in very financially unstable times?

    May be hyperbolic, but thought it an interesting thought experiment if nothing else.

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    The Social Security Trust Fund is sheltered from market swings by being fully invested in Treasury securities, so a market crash shouldn't have any negative effect on benefit distribution.

    My biggest worry about Social Security isn't market fluctuation, but rather the fact that baby boomers are living a hell of a lot longer and will likely be drawing SSI for decades to come. Congress has refused to raise the cap of taxable income at $128,400, so someone making $100 million a year is contributing as much as the trust fund as someone making low six figures.

    A recession, or heaven forbid, depression won't doom Social Security, but our inability to think outside the box about ensuring the trust fund has enough money in it just might.

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    JaredS Wrote:

    The Social Security Trust Fund is sheltered from market swings by being fully invested in Treasury securities, so a market crash shouldn't have any negative effect on benefit distribution.

    A recession, or heaven forbid, depression won't doom Social Security, but our inability to think outside the box about ensuring the trust fund has enough money in it just might.

    Good points. I think that's the fear, if the govt mismanages funds too irresponsibly during a crash that the fund could not be big enough to handle the demand, if a recession or full on depression where to endure for a decade plus. I wonder. I like to think its protected, but I honestly don't trust the trust fund to not be effected.