Social Security Is Heading For A 22 Percent Benefit Cut In 2032 And A Retiring Senator Has A $1.5 Trillion Plan To Stop It

Social Security's trustees issued a report on June 9 projecting that the Old-Age and Survivors Insurance trust fund will be depleted by the fourth quarter of 2032, one quarter earlier than last year's projection.

When the fund runs dry, the program can only pay out what comes in through payroll taxes, which historically covers about 78 percent of promised benefits.

For the average retiree currently receiving roughly $2,071 a month, that is a cut of approximately $455 per month.

Senator Bill Cassidy of Louisiana, who lost his Republican primary to a Trump-backed challenger in May and is leaving the Senate in January, is using his remaining months to push what he calls his "Big Idea" for preventing that cut without raising taxes or reducing benefits.

The proposal calls for the federal government to borrow $1.5 trillion over five years and invest it in a diversified stock and bond portfolio held in a fund separate from Social Security's existing trust funds.

Over 65 to 70 years, Cassidy says the fund would grow enough to cover 60 to 65 percent of Social Security's $25 trillion unfunded liability.

He models the idea on the National Railroad Retirement Investment Trust, a bipartisan 2001 reform that allowed railroad pension assets to be invested in private securities and improved that program's solvency.

The obstacles are significant. No formal legislation text has been introduced.

The proposal requires 60 votes in the Senate, meaning it must be bipartisan. Democrats generally favor raising payroll taxes on high earners, Sen. Sheldon Whitehouse has proposed applying Social Security taxes to all income above $400,000, while many Republicans oppose tax increases and prefer raising the retirement age.

Independent researchers at Boston College say Cassidy's math is unlikely to work under realistic market return assumptions.

"The longer you wait, the harder it is to fix," Cassidy told CNBC. He leaves in January.