One thing missing from the collapse narrative is the historical performance of diversified private investment. As far as I know, there has never been a 20-year period in American history in which a broad, diversified equity portfolio produced negative real returns. My own retirement account is diversified across U.S. equities, developed-market equities, emerging-market equities, U.S. and foreign REITs, U.S. and foreign fixed-income securities, and gold. A portfolio like that compounds across many different economic regimes, not just during post-war American dominance.
By contrast, Social Security is a pay-as‑you-go transfer system tied directly to demographics. It doesn’t invest, it doesn’t compound, and it doesn’t generate inheritable wealth. If the money now taken in payroll taxes were invested in diversified assets instead, most workers would retire with higher real returns and be able to leave something to their children. At the macro level, that shift would also increase capital formation, raise productivity, and reduce government debt.
The real issue isn’t that markets can’t deliver long-run returns. It’s that Social Security is structurally incapable of doing so.
Yeah, there’s definitely a better way social security could have been setup, but it’s the government, so what can you expect? Incompetence and short-term thinking is endemic to bureaucrats and politicians.
As far as a diversified portfolio, it sounds like you have a great one! I’d still ask, as a percentage, how many of these assets are dollar-denominated, and what would happen if inflation became 20%, or 30%, rather than what it is today.
Also for things like gold I’d suggest taking personal inventory (if you haven’t already) and not having counterparty risk there, so you own actual physical gold, and not paper representing gold.
My holdings are all in ETFs, but the underlying exposures are to real assets: equities, real estate, and gold. In a severe inflation scenario, those assets typically rise in nominal dollar terms because the currency is depreciating. That preserves real value across most of the portfolio.
The only component that would lose real value is fixed income, since its payments are fixed. Gold, by contrast, tends to rise not just nominally but in real terms during inflationary shocks because it functions as a non-depreciating monetary asset and is often counter-cyclical.
The broader point is that a globally diversified portfolio compounds across different economic regimes. Social Security doesn’t compound at all because it isn’t an investment system; it’s a demographic transfer system. Over long horizons, those two models produce very different outcomes.
One thing missing from the collapse narrative is the historical performance of diversified private investment. As far as I know, there has never been a 20-year period in American history in which a broad, diversified equity portfolio produced negative real returns. My own retirement account is diversified across U.S. equities, developed-market equities, emerging-market equities, U.S. and foreign REITs, U.S. and foreign fixed-income securities, and gold. A portfolio like that compounds across many different economic regimes, not just during post-war American dominance.
By contrast, Social Security is a pay-as‑you-go transfer system tied directly to demographics. It doesn’t invest, it doesn’t compound, and it doesn’t generate inheritable wealth. If the money now taken in payroll taxes were invested in diversified assets instead, most workers would retire with higher real returns and be able to leave something to their children. At the macro level, that shift would also increase capital formation, raise productivity, and reduce government debt.
The real issue isn’t that markets can’t deliver long-run returns. It’s that Social Security is structurally incapable of doing so.
Yeah, there’s definitely a better way social security could have been setup, but it’s the government, so what can you expect? Incompetence and short-term thinking is endemic to bureaucrats and politicians.
As far as a diversified portfolio, it sounds like you have a great one! I’d still ask, as a percentage, how many of these assets are dollar-denominated, and what would happen if inflation became 20%, or 30%, rather than what it is today.
Also for things like gold I’d suggest taking personal inventory (if you haven’t already) and not having counterparty risk there, so you own actual physical gold, and not paper representing gold.
My holdings are all in ETFs, but the underlying exposures are to real assets: equities, real estate, and gold. In a severe inflation scenario, those assets typically rise in nominal dollar terms because the currency is depreciating. That preserves real value across most of the portfolio.
The only component that would lose real value is fixed income, since its payments are fixed. Gold, by contrast, tends to rise not just nominally but in real terms during inflationary shocks because it functions as a non-depreciating monetary asset and is often counter-cyclical.
The broader point is that a globally diversified portfolio compounds across different economic regimes. Social Security doesn’t compound at all because it isn’t an investment system; it’s a demographic transfer system. Over long horizons, those two models produce very different outcomes.