Why It Matters
A Congressional Research Service report on Social Security trust fund investment reveals a program facing structural strain. The trust funds currently hold approximately $2.56 trillion in U.S. Treasury securities, but that cushion is eroding.
Since 2020, Social Security has been redeeming reserves to cover benefit payments, a shift driven by a fundamental mismatch between incoming tax revenue and outgoing benefits. In 2025 alone, the program ran a deficit of approximately $160 billion, with total income of $1.45 trillion falling short of total expenditures of $1.61 trillion.
The Big Picture
The mechanics of how Social Security invests its reserves illuminate why some policymakers are questioning current practice. By law, the Secretary of the Treasury must invest Social Security tax revenues in special-issue, nonmarketable U.S. Treasury securities.
In 2025, the entire trust fund portfolio earned an effective interest rate of 2.6 percent, while new special-issue securities issued that year carried an average rate of 4.3 percent. The trust funds earn interest semiannually, with proceeds credited by issuing additional securities rather than cash payments.
Certificates of indebtedness that have not been redeemed are reinvested in longer-term special-issue bonds on June 30 annually. Because the Old-Age and Survivors Insurance Trust Fund (the main federal account used to pay Social Security retirement and survivor benefits) faces depletion within the coming years, its bond maturity schedule has been compressed to the 2026 through 2033 window rather than the standard 15-year window, concentrating redemptions into a narrower timeframe.
Policymakers interested in ways to potentially increase interest income to the Social Security trust funds have introduced legislation to alter trust fund investment practices. Various advisory councils and congressional committees have generally endorsed current Social Security investment practices over the years.
Past legislative proposals would have allowed investment of a portion of Social Security reserves in equities. The Secretary of the Treasury may invest in marketable federal securities if deemed in the public interest, but in practice open market purchases have been rare.
The Bottom Line
Social Security remains self-financing in the near term, covering over 71 million beneficiaries with an estimated 186 million workers, representing 93 percent of all workers in 2026. Since 2020, Social Security has been drawing down principal from its trust funds.
The gap between the 2.6 percent effective rate earned on existing holdings and the 4.3 percent available on newly issued securities underscores a tension Congress will face as it considers whether current investment constraints are leaving money on the table. Trust fund reserves are projected to be depleted in 2034.
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