By: Jeremy Mulvihill
on October 12, 2018
An under-the-radar issue for Social Security has been falling interest rates.
For the consumer and businesses, falling interest rates have been a blessing. Near-record-low rates have allowed homeowners to refinance their mortgages, and new homeowners to purchase homes with low 15- or 30-year mortgage rates. Businesses have also been able to expand, hire, and make acquisitions for an exceptionally low cost.
Low interest rates have had the opposite effect on people and funds looking to make money from fixed-income assets. The OASDI specifically invests in special issue bonds available only to Trust funds, as well as a small number of certificates of indebtedness. In the coming years we're going to see bonds yielding 3.5%+ maturing, leaving the Trust invested in special issue bonds with low yields that may not top the inflation rate. The longer the Federal Reserve keeps rates near historic lows, the less interest income the OASDI will generate, and the quicker the program could burn through its spare cash. Continue Reading