BlackRock CEO Larry Fink discussed possible Social Security reforms that would allow more Americans to benefit from the growth in the stock market while also ensuring the program is strengthened so it can survive to serve future generations.
Fink's recently released annual chairman's letter touched on how Social Security is "one of the most effective poverty-prevention programs in history" and that while it provides stability, it "doesn't allow most Americans to build wealth in a way that grows their country."
"Today, the system operates largely on a pay-as-you-go basis. Payroll taxes are used to pay current retirees, and the Social Security trust fund is invested primarily in U.S. Treasury bonds. In effect, workers lend money to the government and receive defined benefits in return."
"The structure, designed as a social insurance program, emphasizes stability and predictability. What it doesn't do is let people grow their benefits along with the broader economy. The question is whether the Social Security system could allow both," Fink said.
He said that this could be accomplished by asking whether a portion of the system could be invested "carefully, broadly, and over decades" like other long-term pension systems.