Can Pinching Pennies Really Save Social Security?

Guest Post by Peter Reagan

With Social Security on track to cut benefits by 20% in a few years, D.C.’s “major fix” is worth just pennies. Are politicians out of touch – or just out of time? And why do they think that putting our savings at greater risk is the solution?

I’ve been warning about how insecure Social Security is for those who are looking towards the program for their retirement. And many Americans are setting their hopes of having a secure and comfortable retirement on the promise of Social Security being there when they need it.

In fact, it’s become such an important part of the very concept of retirement in the U.S. that even the hint of touching Social Security benefits is considered by many politicians to be political suicide. The “third rail” of politics.

So, of course they don’t want to touch it. Would you, if your job was on the line if anyone so much as accused you of considering cutting the program’s benefits? The problem, though, is that Social Security is in very real trouble.

The funding shortfall is a hole that’s getting deeper and deeper each year. Here’s the latest.

How bad is the Social Security situation?

When you start getting into the numbers, you begin to realize how little time that Social Security has left. Aimee Picchi with CBS News writes:

Social Security is on track to deplete its trust funds by 2033, one year sooner than previously forecast, when the federal retirement program will be required to cut monthly benefits by about 20%. 

Now, keep in mind that many Americans already are just scraping by on their current Social Security benefits. In just a few years, if nothing changes, those already-barely-enough benefits could be cut 20%. Let me repeat – this is not one of those Social Security myths you hear floating around from time to time.

This is a matter of official public record: 

The Old-Age and Survivors Insurance (OASI) Trust Fund will be able to pay 100 percent of total scheduled benefits until 2033, unchanged from last year’s report. At that time, the fund’s reserves will become depleted and continuing program income will be sufficient to pay 77 percent of total scheduled benefits.

The Social Security Board of Trustees has been begging for help from Congress, year after year, with some variation on this:

Lawmakers have many options for changes that would reduce or eliminate the long-term financing shortfalls. Taking action sooner rather than later will allow consideration of a broader range of solutions and provide more time to phase in changes so that the public has adequate time to prepare.

That’s bureaucrat talk which translates as, “For the love of God, please do something!”

A 20% pay cut would be a problem for most working families – for retirees, though? Devastating. Talk about digging a hole too deep to climb out of!

So why isn’t Congress fixing it? I have a theory about that! It has two parts:

1. Members of Congress mostly can’t see beyond the end of their own terms. Members of the House can’t see more than two years into the future; members of the Senate no more than six years – anything beyond that is someone else’s problem.
2. ANY change to Social Security, even if it’s genuinely an improvement, gets a lot of attention and argument. It’s genuinely difficult to have a productive conversation about it because half the nation starts shouting, “Hands off Social Security!”

So any changes, even really good ones, to Social Security? Well, they aren’t easy.

Maybe it’s not all doom and gloom, though. Recently, the Trump administration has announced “a major shift” in how Social Security is handling payments. What is this major shift?

The Social Security Administration (SSA) issued a new alert on Monday about its plan to discontinue issuing paper checks for benefit payments starting September 30.

Yes, the federal government is so behind the times that they’re still sending paper checks… Hardly “a major shift,” right?

But there is a benefit:

The cost difference is notable: Issuing a paper check costs about 50 cents compared to less than 15 cents for an EFT [Electronic Funds Transfer]. The transition could save the government millions of dollars each year.

So, they’d be saving 35¢ per check. Which won’t even buy you a cup of the cheapest gas station coffee.

Sure, with the massive number of checks sent out each month, it does add up. Let’s do the math:

• Today, there are 70 million Social Security recipients
• The SSA says just 0.7% of them get paper checks – however, July 2025 data say there were half a million physical checks sent, or 8.7% of the total
• So we’ll split the difference and say 4.2% get a check every month
• 70 million * 4.2% * 12 months * 35¢ = $12,348,000 in savings annually

Now, $12.3 million – that’s not nothing! 

On the other hand, the total program cost in 2024 was $1.485 trillion.

So, on net, this cost-cutting measure will reduce costs by a mere 0.8% – and that’s probably an overly generous estimate, considering that the SSA claims less than 1% of beneficiaries actually get checks.

The simple fact that this trivial cost-cutting measure is described as “a major shift” tells you a lot, doesn’t it?

But don’t worry, there’s a plan to fix it…

The latest proposed Social Security fix

Social Security has a funding shortfall. Here’s how funding shortfalls are fixed:

• Increase revenue, by:
  • Raising taxes
  • Boosting income
• Cut costs, by:
  • Reducing benefits
  • Increasing efficiency

I mean, it’s not rocket science. 

If the Social Security Trust Fund were invested wisely, that could definitely help solve the problem – simply boosting income. Right?

So how’s the Trust Fund doing, in a return-on-investment sense?

Actually, you better sit down before reading any further…

In terms of return on investment, our money, you know – those Social Security taxes you and I and every working American has withheld from our paychecks – it’s not exactly working for us:

 

I added a red line to indicate the average official inflation rate – and, as you can clearly see from the chart, ever since the Great Financial Crisis the Social Security Trust Fund has been actually losing money when we factor in inflation. Thanks for nothing, Ben Bernanke… 

That’s just not going to cut it. In fact, the only good news (if you squint at the far right-hand side of the chart) is that, very recently, the Trust is out-earning inflation.

Why? Because, by law, the Trust is only allowed to invest in a single asset class: U.S. federal government debt. (When people say “The Social Security Trust Fund is full of IOUs,” that’s what they’re talking about.)

So let’s go back to the solutions:

• Raise taxes (nobody wants this!)
• Cut benefits (say this out loud and you’ll lose your seat in Congress)
• Increase efficiency (as we saw with the “major shift,” this is both possible and not enough)
• Boost income (by increasing return on investment)

So of the three solutions, only one seems politically and practically feasible. Boost income.

In finance, there’s exactly one way to increase your return on investment. Here’s how Allison Schrager with Bloomberg News describes it:

So I have been hearing for literally decades that there is a simple, magical solution to all our retirement funding problems: Just take more risk! When the investments pay off, the coffers will be replenished and all will be well.

Why didn’t we think of that? What an amazing idea!

And, obviously, some in Washington actually think it is an amazing idea…

Now two U.S. senators, Republican Bill Cassidy of Louisiana and Democrat Tim Kaine of Virginia, have offered a bipartisan proposal to create a separate fund for Social Security, whose existing trust fund can invest only in U.S. government debt. The new fund would be allowed to invest “in stocks, bonds and other investments that generate a higher rate of return.”

On the one hand, investing exclusively in an underperforming asset is clearly a bad idea.

On the other hand, though?

This would be a huge leveraged bet on behalf of the taxpayer. And – spoiler alert – taking risks doesn’t always work. Many public-sector pensions are underfunded, despite their ability to invest in a market that has seen some pretty stellar returns over the last 20 years.

“A huge leveraged bet” means an enormous risk. And taking risks does not guarantee higher returns! In fact, in financial terms, there’s no such thing as risk-free reward. There is, however, a lot of reward-free risk… 

Who gets to pick what assets belong in the Social Security Trust portfolio? Do they have fiduciary responsibility? Would they pick assets based on quality or would they pick and choose based on, oh, I don’t know, maybe the $4.5 billion spent on lobbying every year?

I can imagine a scenario where a Navy Admiral in full dress uniform meets with the head of the Social Security Trust Fund and explains that, without this particular shipyard, the Navy would be in real trouble. Then the head of the Air Force is talking over him, explaining that his defense contractors need more support too.

Talk about a cure that’s worse than the disease… Folks, I do not want our Social Security Trust turning into a new source of pork-barrel project funding! 

That’s terrifying.

Even worse, we’ve been down this road before…

The 401(k) was originally introduced in the late 1970s as a way to give American workers more direct control over their retirement savings. Instead of relying on traditional pensions – where employers guaranteed a set income in retirement – 401(k)s shifted the responsibility of retirement planning to individuals. Supporters of this law argued that pensions were expensive (for companies), inefficient and socialist. The free market, they said, would do a much better job with our retirement savings than a pension fund manager.

In theory, this was supposed to be empowering. Workers could invest, grow their nest eggs and tailor their asset selection to suit their own needs. Take more risk, or less, as they chose. They could save as much as they wanted! Or as little. They could invest as they chose! But all too many workplace retirement plans are limited to a handful of extremely expensive, actively-managed investments – you know, the kind that work out great for the seller and terribly for the buyer. 

Most Americans were never taught how to manage long-term investments. Or how to avoid hidden fees. Or to account for inflation, or to balance risk and reward…

Today, the average 401(k) balance today falls far short of what’s needed for a fancy wedding, let alone a comfortable retirement.

Essentially, the invention of the 401(k) didn’t solve the problem! Instead, it created a whole new one. Thanks to the 401(k), generations of American workers are even more dependent  on whatever’s left of Social Security.

I don’t want to mince words. The invention of the 401(k) was a huge boost to major corporations – they no longer had to worry about funding pensions. The financial services industry made billions in fees from it, too.

Me, you and everybody else paid for it.

In other words, just take on more risk? We tried it – it didn’t work.

Creating your own security

The bottom line is that if you’re looking for Social Security to take care of you in retirement, you’re very likely to be disappointed. Bureaucrats simply aren’t good with money, and their motivations and incentives do not match ours.

The money we’ve paid into Social Security isn’t ours – anyway, it’s gone. It’s the opposite of secure. But there is something that you can do to help to ensure that your retirement is secure.

I don’t know about you, but when it comes to my retirement savings, I’m a lot less interested in return on my money than I am in return of my money. I’m concerned about preserving my purchasing power – making sure I don’t lose ground – as much as I am with growing my savings.

That’s why the foundation of a reliable plan for retirement savings is inflation-resistant stores of wealth, especially physical precious metals. They’re just about the only financial assets you can both own outright and hold in your hand. Most investors are vastly underweight in their allocation to gold and silver, if they own any at all…

Should you take advantage of the purchasing power preservation and diversification of physical precious metals. I think it’s wise, but it’s your decision – start your due diligence by learning more about precious metals IRAs.

As central banks continue unprecedented money creation, protecting your purchasing power becomes critical for retirement security. Physical gold IRAs offer a tax-advantaged solution, allowing you to hold tangible precious metals with intrinsic value independent of currency fluctuations. To learn more about how physical gold could help protect your retirement portfolio, click here to get your FREE info kit on Gold IRAs from Birch Gold Group.