The Hard Truth About Trump’s Social Security Plan 

There are millions of Americans today who collect monthly benefits from Social Security in retirement. And without those benefits, many would no doubt struggle to make ends meet.

The unfortunate reality is that many seniors enter retirement with minimal funds socked away. The Federal Reserve puts median savings among 65- to 74-year-olds at just $200,000 as of 2022. Based on that, it’s clear that without Social Security, a good number of retirees would have to make hard choices.

But sadly, Social Security is facing the possibility of benefit cuts in about a decade’s time. As more older workers exit the labor force, Social Security will lose out on critical payroll tax revenue — revenue it currently depends on to keep up with its financial obligations.

In fact, in the coming years, experts anticipate that Social Security’s resources will be severely strained as baby boomers not only retire in droves, but start claiming benefits themselves.

Social Security has trust funds it can tap to keep up with scheduled benefits for a period of time. But the program’s Trustees anticipate those trust funds being emptied in about a decade’s time. From that point onward, Social Security cuts are a possibility current and future retirees might have to grapple with.

Trump’s Social Security plan could make things worse in the long run

As part of his presidential campaign, Trump promised not to touch Social Security. He also pledged to do his part to eliminate taxes on benefits.

Currently, federal taxes apply to Social Security at fairly low-income thresholds. Getting rid of those taxes could put a lot more money in seniors’ pocket.

But Trump’s Social Security plan has a major flaw. And it’s one that could push the program closer to insolvency.

Although Social Security gets most of its funding from payroll taxes, that’s not the program’s only revenue source. Social Security also gets funded by the taxes that are imposed on benefits.

If President Trump moves forward with plans to eliminate taxes on benefits, it could leave seniors with larger Social Security checks in the near term. But it could also move up the timeline for Social Security cuts.

As of now, the program is looking at broad benefit cuts in 2035. If taxes on benefits are eliminated, Social Security cuts could happen much sooner, leaving current and future retirees even less time to prepare for them.

Will Trump’s Social Security plan come to life?

President Trump may have good intentions with his Social Security plan. But it could lead to a world of backlash. For this reason, it may not get the lawmaker support it needs to come to fruition.

Simply put, lawmakers cannot afford to do anything to increase the likelihood of Social Security cuts. Slashing benefits could plunge millions of seniors below the poverty line, and that’s a crisis lawmakers aren’t apt to want to take on.

What may happen, though, is that Trump will pivot and push for higher thresholds at which taxes on Social Security benefits apply. That could lift the burden on lower- and moderate-income seniors while ensuring that higher-income seniors continue to pay taxes on Social Security since they can afford to.

Of course, even if no changes are made to taxes on Social Security, there’s still the possibility of benefit cuts that lawmakers will have to deal with. But Trump’s proposal has the potential to make the problem exponentially worse, which is why seniors should not expect to be broadly let off the hook as far as those taxes go anytime soon.

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