President-elect Donald Trump has proposed eliminating taxes on Social Security benefits for seniors. Currently, up to 85% of benefits are taxed for many recipients, depending on their combined income. Trump’s plan could boost disposable income for about half of all beneficiaries, especially those with higher incomes.
However, some economists warn that this change might speed up the depletion of Social Security’s trust fund. The taxes on benefits are one of the program’s three critical funding sources, along with payroll taxes and interest income. Social Security’s cost has already exceeded its income for years, and the trust funds are projected to run out by 2034.
If Trump succeeds in eliminating the benefit taxes, Social Security will have even less time until it becomes insolvent. While benefits wouldn’t disappear completely, retirees could face significant cuts if the government can’t find a way to increase funding.
Trump’s proposal impacts Social Security
The government has addressed similar crises before, but the closer the insolvency deadline gets, the fewer options there are to fix it. Trump’s plans for Social Security would have both positive and negative consequences. Younger retirees and workers may be more concerned about the long-term implications.
But it’s important to remember that Trump can’t eliminate the benefit taxes on his own. He would need Congress to pass a law, and it’s unclear whether he will have enough support. For now, retirees can only wait to see what happens over the next four years.
Building savings to be less reliant on Social Security is a smart move in the meantime. Meeting with financial and tax advisors can also help ensure retirement plans adapt to any changes while maintaining long-term security.
