Social Security is an insurance program, not a retirement/pension plan. If the funds were in the stock market they would be subject to sequencing issues. As an example, the SP 500 lost about 60% of its value from its peak in Oct, 2007, until it bottomed out Mar, 2009. The SS fund still paid out during this entire time. The fund would have been taken a huge hit that it would not have recovered from if it had been invested in the stock market while continuing to pay out to beneficiaries. The SS Fund cannot be subject to the risks of the stock market.
SS was created to reduce poverty of the elderly in the 1930s. Roughly 50% of the elderly lived below the poverty level in 1935. The number is now around 10%. This is a good thing. If SS did not exist, welfare would have been paying and that comes out of the US General Fund. The money would come from somewhere. Currently, SS is the largest portion of income for 60 percent of households age 65 and older.
Around 9% of SS payments are survivors benefits and around 13% are disability payments.
There are multiple reasons for the impending deficits. There are the ones we all hear about like not enough workers and people living longer. But there are some others that remain off the radar.
1. SS started paying out before it was funded. The initial group receiving benefits paid zero or very little into the fund while they were receiving benefits. This legacy debt has never been paid off.
2. When Reagan and the Congress raised the tax amount taken from wages for SS and made full retirement 67 in the early 1980s, the SS fund became loaded with $$$. Reagan and Congress proceeded to borrow the money to fund the US government while leaving IOUs in the fund. The IOUs have interest attached to them, but there is much debate about level. Other Presidents and Congresses have also used the SS fund.
3. Wage stagnation among lower-income workers over the past forty years means that the wage base subject to the payroll tax, the primary source of funding for Social Security, is not as large as it should be. Adding to the this, less people are getting overtime due to the misclassification of their jobs. The largest wage growth over the last 40 years happens to be above the SS wage cutoff ($160,200 this year).
Here is the article were most of this info comes from. It is an interesting read.
Members of Congress are once again discussing possible cuts to Social Security as they contemplate increases to the debt limit. Instead of viewing Socialtcf.org
The market recovered after the recession of 2008. If you weren't stupid enough to pull everything out or try to time the market, your savings didn't disappear. And you still would have much greater returns than SS.
As far as not being able to pay out, even if true, I'm sure the government would have been creative enough to print money or add to the deficit in some way so that people still got their money