Fink: ‘Diversification’ Could Fund Social Security

In his annual letter to investors released Monday, BlackRock CEO Larry Fink touted the benefits of “expanding long-term investing” in retirement systems, saying it could lead to the program’s long-term financial security.

Fink noted that the federal Thrift Savings Plan and many states’ public pension systems have diversified portfolios and said a “measure of diversification,” including private market access, could also provide stability to Social Security. The Congressional Budget Office’s February projection estimated that the Social Security trust fund will be depleted in 2032, two years sooner than previously thought, leading to benefits being cut by at least 20%.

Fink highlighted a bill proposed by Senators Bill Cassidy, R-Louisiana, and Tim Kaine, D-Virginia, to create a new investment fund for Social Security that would supplement its trust fund (which primarily invests in Treasury securities) with investments in stocks and bonds for higher long-term returns. Fink claimed the plan would not result in a change of benefits for anyone “currently on Social Security or nearing retirement.”

“This would not mean privatizing Social Security or putting it all into the stock market,” Fink wrote. “The goal would be to strengthen the system over time while preserving its core guarantees.”

The Cassidy-Kaine proposal would create a fund that would “require an initial investment of roughly $1.5 trillion and would be given 75 years to grow,” Fink wrote. “Once the fund matures, it would pay the Treasury back [what Treasury contributed to keep Social Security solvent] and supplement payroll taxes going forward, helping close the gap between what the system takes in and what it pays out.”

Fink noted that, since 1989, a dollar in the U.S. stock market has grown more than 15 times the value of a dollar tied to median wages. While Fink posited that artificial intelligence could create even higher economic value, he raised concerns that only a small percentage of investors would benefit from those gains if investment opportunities were not broadened.

As the chair of the world’s largest asset manager, Fink has promoted private market investments in previous annual investor letters. Last year, Fink claimed that 401(k) plans investing in private assets could fix a “retirement gap” by boosting portfolios and decreasing the risk of depleting savings. His 2024 letter argued that governments must “prioritize building out robust capital markets” to support the growing aging population.

Meanwhile, at a panel about Social Security at last week’s EBRI-Milken Institute Retirement Symposium, speakers said the U.S. government would need to reach a bipartisan agreement to save the benefits program from insolvency. Moderator Emerson Sprick, director of retirement and labor policy at the Bipartisan Policy Center, said the stakes are now higher than when Congress issued the last major revision of the social insurance program, the Social Security Amendments of 1983. His organization estimated that the program will face a $25 trillion shortfall in the next 75 years.

Sita Slavov, a George Mason University professor of public policy, said she was afraid of Congress agreeing to raise the federal debt level and borrowing more money to fund Social Security, rather than raising the payroll taxes that support it, as it would not address the program’s shortfall.

Wendell Primus, a visiting fellow at the Center on Health Policy at the Brookings Institution, said Social Security could only be saved through a combination of benefit reductions and tax increases, while arguing for benefit cuts and tax increases for higher earners.

Eugene Steuerle, an institute fellow studying tax and income supports at the Urban Institute, agreed that Social Security needs to undergo “triage” to prioritize trade-offs on benefits and revenues. Summarizing his book “Abandoned,” Steuerle said federal revenue growth goes primarily to programs for older taxpayers—Social Security and health benefits—at the expense of upward mobility programs for younger taxpayers and the working class.

Primus—a former staffer for the late Representative Dan Rostenkowski, D-Illinois, who was chairman of the House Committee on Ways and Means during the 1983 Social Security reform process—said Congress should not resolve Social Security’s problems through a reconciliation bill. He wanted federal lawmakers to follow the example of the 1990 Budget Summit, during which former President George H. W. Bush and bipartisan congressional leaders negotiated to reduce the deficit.