The Bread Aisle and the Next Social Security: Choice, Security, and a Social Security System Built for How Americans Actually Behave

 Visit almost any grocery store in the United States and prepare to be amazed. The choices can be overwhelming. Walk down the bread aisle and you will find everything from brioche, to Wonder Bread, to pumpernickel, along with multiple varieties of almost every one of them. There may be four kinds of pumpernickel, twelve kinds of sandwich bread, eight varieties of Italian bread, and six different packages of hot dog rolls. Americans love variety, and we love optionality. Yet after examining that aisle for a while, most of us reach for the same loaf we bought last week. I am a store-brand bakery man myself, although from time to time I enjoy Pepperidge Farm.

There is something important in that behavior when we think about Social Security and whatever the next version of the program becomes. Choice has value even when people do not constantly exercise it. Having options gives people a sense of control, while a good default gives them somewhere reasonable to land when they do not want to make a complicated decision. That is why I am not opposed to allowing workers some form of individual investment within a redesigned Social Security system. We already operate an enormous federal retirement program that does exactly that through the Thrift Savings Plan, or TSP. The lesson from the TSP is not that we should turn Social Security into a giant brokerage account. The lesson is that government can combine limited choice, low costs, automatic enrollment, professional investment management, and sensible defaults at enormous scale.

Start With What Social Security Actually Is

Any proposal to add investment accounts has to begin by recognizing that Social Security is not simply a national retirement savings account. In July 2026, about 71.3 million people received Social Security benefits. About 57.6 million received retirement benefits, 5.8 million received survivor benefits, and nearly 8 million received Disability Insurance benefits. These survivor and disability protections are not incidental features of the program. They insure families against events that individual retirement accounts handle poorly, especially death or disability early in a worker's career before decades of savings have accumulated. Social Security also provides lifetime benefits that help protect retirees from outliving their personal savings. Any reform that destroys those functions in pursuit of higher investment returns would solve the wrong problem (Social Security Administration, 2026a).

Figure 1. Social Security Beneficiaries by Major Benefit Type, July 2026

Source: Social Security Administration, Monthly Statistical Snapshot, July 2026.

We also have to separate modernization from solvency. The 2026 Social Security Trustees project that the Old-Age and Survivors Insurance Trust Fund will exhaust its reserves in the fourth quarter of 2032. Continuing revenue would then be sufficient to pay about 78 percent of scheduled OASI benefits. If the OASI and Disability Insurance funds are viewed on a hypothetical combined basis, reserves are projected to become depleted in the third quarter of 2034, when continuing income would support about 83 percent of scheduled benefits. The combined 75-year actuarial deficit is now 4.42 percent of taxable payroll. That is a serious financing problem, and simply creating personal investment accounts does not make it disappear (Social Security Board of Trustees, 2026).

Figure 2. What Happens When Social Security Reserves Are Depleted

Source: Social Security Board of Trustees, 2026.

That distinction is essential because personal investment accounts are not, by themselves, a solvency proposal. Social Security currently collects a combined 12.4 percent payroll tax, divided equally between workers and employers in most employment relationships. Each side contributes 5.3 percent of taxable earnings to OASI and 0.9 percent to Disability Insurance, for a total contribution of 6.2 percent each. Current payroll taxes largely finance current benefits, rather than accumulating in separate accounts bearing each worker's name. Diverting a significant portion of those existing taxes into personal accounts without replacing the revenue would therefore create another financing hole while Social Security is already drawing closer to reserve depletion. Congress would have to address that transition explicitly rather than pretending the same dollar can simultaneously finance today's retiree and tomorrow's personal investment account (Social Security Administration, 2026b).

We Already Have a Working Model

The federal government has already demonstrated that choice and government-administered retirement programs are compatible. The TSP provides five principal investment funds plus a family of Lifecycle Funds that allocate money among those investments according to a participant's expected retirement date. The basic choices include government securities, fixed-income securities, large-company U.S. equities, smaller U.S. companies, and international equities. Instead of forcing every employee to construct a portfolio, Lifecycle Funds automatically diversify investments and gradually become more conservative as retirement approaches. That provides meaningful choice without requiring millions of federal workers to become professional portfolio managers. It is remarkably close to the architecture that a personal investment component of Social Security would need (Federal Retirement Thrift Investment Board, 2026a).

At the end of 2025, TSP participant assets totaled approximately $1.073 trillion. About 35 percent of participant assets were allocated to the C Fund, 26.3 percent were in Lifecycle Funds, and 22.4 percent were in the government-securities G Fund. Another 8.6 percent was in the S Fund, 5.3 percent in the I Fund, and 2.2 percent in the F Fund. Most interestingly, only about 0.1 percent of participant assets were allocated through the much broader mutual fund window. Federal workers therefore have considerable optionality, yet the overwhelming majority of their retirement assets remain concentrated in a small collection of understandable investment choices. That is the bread aisle in practice. People appreciate having choices without necessarily wanting thousands of them (Federal Retirement Thrift Investment Board, 2026a).

Figure 3. Where TSP Participants Put Their Money, December 31, 2025

Source: Federal Retirement Thrift Investment Board, 2026a.

The TSP also demonstrates that government can administer a very large investment program at relatively low cost. In 2025, the TSP reported $432 million in gross administrative expenses and $341 million in net administrative expenses. Its net expense ratio charged to participants was 3.4 basis points. That is equivalent to approximately 34 cents annually for every $1,000 invested. A Social Security investment program would operate at a still larger scale and would create different recordkeeping requirements, so we should not simply assume that the TSP expense ratio could be duplicated. What the TSP proves is that a federally governed, institutionally managed, low-cost investment platform is not theoretical. We already have one (Federal Retirement Thrift Investment Board, 2026b).

But There Is a Problem With Choice

There is an obvious objection to giving Americans more control over their Social Security retirement money. Many people are simply not very good at managing money. That is not an insult to the American public. It is a policy reality that any serious retirement system must acknowledge. The Federal Reserve reported in 2026 that only 63 percent of adults said they could pay an unexpected $400 expense entirely using cash, savings, or a credit card paid off at the next statement. Another 12 percent said they could not pay the expense by any means, while the remainder would have to borrow, sell something, or rely on another approach. Only 35 percent of non-retirees believed their retirement savings were on track. Designing Social Security around the assumption that every worker will patiently diversify investments, understand fees, rebalance a portfolio, and resist panic during a market decline would therefore be designing around a population that does not exist (Board of Governors of the Federal Reserve System, 2026).

Figure 4. The $400 Test

Source: Board of Governors of the Federal Reserve System, 2026.

The FINRA Investor Education Foundation provides another warning. Its 2024 National Financial Capability Study surveyed more than 25,000 American adults and found that only 46 percent had set aside enough emergency savings to cover three months of expenses. That was down from 53 percent in 2021. FINRA also found significant differences in retirement preparation according to education, with 80 percent of college graduates reporting a retirement account compared with only 37 percent of adults with no college experience. The study found deterioration in several measures involving households' ability to make ends meet and prepare for financial emergencies. The problem is therefore not simply whether people know the definition of compound interest. Financial capability requires people to translate knowledge into good decisions repeatedly over decades (FINRA Investor Education Foundation, 2025).

Figure 5. Emergency Savings Have Gone Backward

Source: FINRA Investor Education Foundation, 2025.

Popular culture provides another, less scientific window into the problem. Caleb Hammer's Financial Audit has become enormously popular by sitting ordinary people down and going through their debts, purchases, automobile loans, credit cards, savings, and spending decisions. Hammer Media reports that the broader brand has accumulated more than 3 million subscribers and billions of views. His guests are self-selected and frequently chosen because their financial situations make compelling entertainment, so the program should never be treated as a representative study of American household finances. Yet the popularity of the show tells us something important about the enormous appetite for basic financial guidance. The recurring problems are familiar because millions of Americans recognize some version of them in their own lives. These include spending without tracking it, carrying expensive debt, financing depreciating purchases, failing to build an emergency fund, and approaching middle age with little saved for retirement. Financial Audit is entertainment, but the behavioral problems that make it entertaining are very real (Hammer Media, 2026).

Financial Literacy Changes the Design

Low financial literacy is not an argument against giving people any choice. It is an argument against giving people unlimited choice with catastrophic consequences. We permit people to choose mortgages, automobiles, health plans, colleges, retirement plans, and investments even though some consumers make terrible decisions involving each of them. Good public policy does not always eliminate choice because some people exercise it poorly. Instead, it can structure choices so that doing nothing still produces a reasonable result while the most destructive choices are unavailable. That is exactly where the TSP model becomes more useful than an ordinary commercial brokerage account. Social Security should provide an aisle, not a casino.

A Social Security investment account should therefore never operate like an unrestricted retail brokerage account. Participants should not be permitted to buy individual stocks, options, leveraged products, meme stocks, cryptocurrencies, or other highly speculative investments with money intended to support them in old age. The basic system might offer only a government securities fund, a bond index fund, a broad U.S. equity fund, a small-cap fund, an international fund, and Lifecycle Funds built from those choices. People who genuinely want to make an investment decision could do so. People who never want to think about asset allocation could leave their money in the default for forty years. Choice would exist without making retirement security dependent upon financial sophistication.

This is also where my original instinct about a G Fund-like default needs refinement. There should absolutely be a protected government-securities option within the system, and part of the Social Security contribution may need to remain entirely outside market risk. But placing a 22-year-old worker's entire personal investment account into government securities for forty years creates another risk, which is sacrificing long-term growth in the pursuit of short-term stability. The TSP itself moved away from using the G Fund as the automatic destination for newly enrolled workers and adopted age-appropriate Lifecycle Funds instead. That is probably the better default for the individually invested portion of a future Social Security system. A worker who wants the security of government securities should be free to select it. A worker who does nothing should receive a professionally diversified portfolio appropriate for his or her age (Federal Retirement Thrift Investment Board, 2026c).

A Two-Layer Social Security

The better architecture is therefore not privatized Social Security. It is a two-layer Social Security. The first layer remains social insurance and provides a guaranteed progressive lifetime retirement benefit along with survivor and disability protections. This is the portion of the program that protects people from poverty, longevity, disability, premature death, and financial mistakes. The second layer would provide limited individual ownership and investment choice through an institutional structure modeled on the TSP. Workers would see an identifiable balance and could choose among a handful of professionally managed investments. The existence of the second layer should strengthen rather than replace the first.

One possible starting framework would preserve the employer contribution primarily for the pooled insurance system while eventually directing some portion of the employee retirement contribution toward an individual investment account. That should be viewed as an architecture for actuarial analysis rather than a predetermined allocation. Disability Insurance should remain pooled because disability risk is fundamentally an insurance problem, particularly for younger workers who have not had decades to build assets. Survivor protection should likewise remain associated with the protected social insurance layer. Congress would then determine how much of the retirement contribution must remain in the guaranteed pool and how much could become individually invested. Those percentages should emerge from serious actuarial modeling rather than political slogans.

This approach would also create something many workers currently feel Social Security lacks: visible ownership. Social Security benefits are earned rights under federal law, but workers do not have an account balance containing the payroll taxes associated with their Social Security number. An investment layer would allow part of a worker's retirement resources to accumulate as a visible financial asset. Congress would have to determine rules concerning inheritance, division upon divorce, annuitization at retirement, and what happens to unused balances after death. Those are complicated issues, but complicated is not the same thing as impossible. The TSP, private pensions, defined-contribution plans, Individual Retirement Accounts, and other retirement systems already answer many of the same questions. A modern Social Security system should be capable of doing so as well.

Protect People From Themselves

There should probably be another restriction that will frustrate people who believe ownership means unrestricted access. The money should be extraordinarily difficult to withdraw before retirement. If workers can raid their Social Security investment accounts whenever the transmission fails, Christmas arrives, college tuition is due, or credit card debt becomes uncomfortable, the retirement purpose of the program will quickly disappear. Congress could create tightly defined exceptions for catastrophic circumstances without turning the account into an emergency checking account. Forty years of compounding only works when the money is actually allowed to compound for something approaching forty years. The freedom being created is the freedom to influence how retirement savings are invested, not the freedom to consume tomorrow's retirement income today.

Financial education should accompany the system, but we should also reject the comforting idea that education alone fixes bad financial behavior. Americans have been told for decades to save more, pay down high-interest debt, establish emergency funds, diversify investments, and prepare for retirement. Yet only 46 percent of adults in the FINRA study had accumulated three months of emergency savings, while the Federal Reserve found just 35 percent of non-retirees believed their retirement savings were on track. People also encounter unemployment, medical bills, housing costs, childcare, inflation, family emergencies, and periods when there simply is not much money left to save. Some financial problems result from bad decisions, while others result from inadequate resources or bad luck. A national retirement program needs to survive all of those realities. That means using education, automatic contributions, restricted choices, diversification, defaults, and guarantees together rather than expecting a financial literacy class to carry the entire burden (Board of Governors of the Federal Reserve System, 2026; FINRA Investor Education Foundation, 2025).

The Transition Cannot Be Hidden

The hardest part of this proposal is not investment management. It is paying for the transition. Current workers' payroll taxes are largely financing current beneficiaries, so directing existing payroll-tax dollars into personal accounts means those dollars are no longer immediately available to pay current benefits. Social Security was never designed as a system in which each generation simply places money into its own investment account and returns decades later to collect it. Moving toward even a partial individual-account model therefore creates a period in which the country must finance existing promises while simultaneously funding new accounts. That obligation could last for decades. Any advocate who proposes personal accounts without explaining who finances that transition is offering only half a proposal.

That problem does not mean the idea should be rejected. It means Social Security solvency must be addressed alongside modernization rather than confused with it. Congress still has to decide how much revenue Social Security should collect, what level of benefits it should promise, how the taxable maximum should work, and how the cost of reform should be distributed across generations and income groups. The Trustees estimate the current 75-year actuarial deficit at 4.42 percent of taxable payroll. Individual investment accounts do not erase that number. In fact, diverting existing payroll taxes without replacement financing could make the near-term cash problem worse. The intellectually defensible case for personal accounts is therefore that they can improve ownership, wealth accumulation, flexibility, and public engagement after Congress confronts the underlying financing problem (Social Security Board of Trustees, 2026).

Choice Without Abandoning the Promise

There are strong arguments against this proposal, and they should be taken seriously. Investment returns are uncertain. Markets can collapse immediately before retirement. People with lower lifetime earnings have less ability to absorb losses. Women and people who spend years outside the paid workforce providing family care may accumulate less in personal accounts. Workers with intermittent employment may also have smaller balances, while sophisticated investors could benefit more from optionality than people with limited financial knowledge. Every one of those problems is an argument for retaining the guaranteed Social Security layer rather than an argument for pretending investment risk does not exist.

There are equally serious arguments for giving workers some additional ownership and flexibility. Long-term participation in diversified capital markets has been an important source of wealth creation for American households with access to retirement accounts. Federal workers already receive access through the TSP to a system combining government oversight, broad diversification, Lifecycle Funds, low administrative costs, and personal choice. It is reasonable to ask why those principles should remain largely unavailable within the retirement system covering almost every American worker. The answer cannot simply be that people might make mistakes because our existing retirement structure already requires millions of Americans to make financial decisions through 401(k)s and IRAs. A carefully designed Social Security investment component could actually provide better guardrails than much of the commercial retirement marketplace. The question is not whether risk exists, but whether we can design the system so that risk is managed rather than ignored.

That brings us back to the bread aisle. Americans like having thirty choices of bread, but nobody requires us to understand agricultural commodities, supply-chain economics, or commercial baking before buying a loaf. We want understandable choices, reasonable prices, good information, and the ability to select what works for us. Once we find something we trust, many of us make the same selection for years. A future Social Security system can embrace the same principle. Give workers meaningful choices, but do not require expertise. Make doing nothing a reasonable financial decision.

The next Social Security should preserve what the current program does uniquely well while recognizing that an architecture created in the twentieth century does not have to remain frozen forever. Keep a guaranteed progressive retirement benefit. Keep disability and survivor insurance. Preserve a protected foundation that cannot disappear because somebody panicked during a market crash or thought a meme stock looked like a retirement strategy. Then allow a carefully bounded portion of retirement resources to build individual wealth through a TSP-style structure, with age-appropriate Lifecycle Funds as the default and a government-securities option available to workers who want greater security. Most workers will probably choose a favorite and stick with it. Just like the bread aisle, the important thing is not that everyone makes a different choice. The important thing is that people have a choice within a system designed to protect them when they make no choice at all.

References

Board of Governors of the Federal Reserve System. (2026). Economic well-being of U.S. households in 2025. Federal Reserve Board. https://www.federalreserve.gov/publications/2026-economic-well-being-of-us-households-in-2025.htm

Federal Retirement Thrift Investment Board. (2026a). Investment program review: December 2025. Federal Retirement Thrift Investment Board. https://www.frtib.gov/pdf/minutes/2026/Jan/Att2-FRTIB-Investment-Program-Review-January-2026.pdf

Federal Retirement Thrift Investment Board. (2026b). Minutes of the January 27, 2026 Board meeting. Federal Retirement Thrift Investment Board. https://www.frtib.gov/meeting_minutes/2026/2026Jan.pdf

Federal Retirement Thrift Investment Board. (2026c). Annual report of the Thrift Savings Plan. U.S. Government Publishing Office. https://www.govinfo.gov/app/details/CMR-Y3_F31_25-00201896

FINRA Investor Education Foundation. (2025). Financial capability in the United States: Results from the 2024 National Financial Capability Study. FINRA Investor Education Foundation. https://www.finrafoundation.org/sites/finrafoundation/files/2025-07/NFCS-Report-Sixth-Edition-July-2025.pdf

Hammer Media LLC. (2026). Caleb Hammer. https://calebhammer.com/

Social Security Administration. (2026a). Monthly statistical snapshot, July 2026. Office of Retirement and Disability Policy. https://www.ssa.gov/policy/docs/quickfacts/stat_snapshot/

Social Security Administration. (2026b). Social Security tax rates. Office of the Chief Actuary. https://www.ssa.gov/oact/progdata/oasdiRates.html

Social Security Board of Trustees. (2026). The 2026 annual report of the Board of Trustees of the Federal Old-Age and Survivors Insurance and Federal Disability Insurance Trust Funds. Social Security Administration. https://www.ssa.gov/oact/TR/2026/