Trump’s plans for Social Security face scrutiny

President-elect Donald Trump has pledged to protect Social Security, but many of his proposed policies could weaken the program’s finances. Social Security has faced a financing shortfall for years due to demographic shifts, with more retirees collecting benefits for longer periods and fewer workers contributing to the fund. Trump has proposed ending some taxes that help pay for Social Security, including those on overtime pay and tips. This could further strain the program’s finances. As the nation awaits the incoming administration’s detailed policy plans, retirees and future beneficiaries are anxious about potential changes to a program vital to their financial security. For most retirees, Social Security provides a financial lifeline that many would struggle to live without. In a recent Gallup survey, 88% of respondents noted their Social Security check accounted for a “major” or “minor” source of income. The 2024 Social Security Board of Trustees Report pegged the program’s unfunded obligations at a staggering $23.2 trillion through 2098. The Old-Age and Survivors Insurance Trust Fund, which is responsible for doling out monthly payments to retired workers and survivor beneficiaries, is forecast to exhaust its asset reserves by 2033. During his campaign, Trump made two proposals regarding Social Security. The first is to avoid making changes to the program.

Trump’s Social Security tax proposal

However, this “do nothing” approach has been criticized as it doesn’t address the growing funding shortfall. The other, more prominent proposal from Trump is to eliminate the taxation of Social Security benefits. While this proposal has support among retirees, it’s seen as problematic given Social Security’s precarious financial state. Eliminating one of its three sources of income could put Social Security on considerably worse financial footing and potentially expedite the timeline to sweeping benefit cuts. Experts warn that Trump’s promise to eliminate taxes on Social Security benefits may not occur as quickly as some hope, if at all. The earliest chance for this provision to be considered by Congress would likely be in 2025, as part of a major tax bill under budget reconciliation procedures. The loss of revenue from eliminating these taxes would be substantial and needs to be offset. Given the growing concern about deficits and potential opposition to Trump’s other revenue-raising proposals, it might be difficult to get all proposed tax breaks included. For now, retirees should remain cautious about making changes to their tax withholdings. The situation in Washington, including GOP control of the House and a narrow majority in the Senate, implies that significant tax changes remain uncertain. Retirees should consult with a tax professional before making any tax-related decisions.