• Donald Trump wants to cut taxes on Social Security benefits, which will impact current and future beneficiaries.
• Fiscal policy experts warn that the cuts could deplete the Social Security fund sooner than expected.
• Low-income baby boomers and younger generations would be most affected by Trump’s proposal.

Donald Trump plans to make changes to the US Social Security system upon his return to the White House in January.

The president-elect pledged during his campaign to cut taxes on Social Security benefits during his second term.

“People on Social Security are being murdered, and one of the things I’m doing is not collecting taxes for seniors on Social Security, and I’m going to get it done quickly,” Trump told Fox & Friends in August.

For some baby boomers, lower Social Security taxes could mean bigger monthly checks in the short term. But fiscal policy experts predict that the Social Security tax cuts, along with other Trump campaign promises, could quickly drain the nation’s Social Security fund. That would jeopardize benefits for low-income retirees and younger generations, who may rely on that income as they age.

“It’s designed to help retirees, but the people it’s going to hurt are the people who rely on Social Security the most,” Taylor Lee, a certified financial planner at Belmont Capital Advisors, told BI about Trump’s proposed tax reduction on social security.

More than 72 million Americans receive Social Security, and the estimated average monthly check in October was $1,924.35, according to the Social Security Administration. Americans can start taking Social Security at age 62, or wait until their full benefits start at 67, the national retirement age.

Trump’s campaign promise came as Business Insider heard from older adults with limited retirement savings, many of whom were struggling to pay for necessities like housing and groceries on their regular Social Security income. Social Security income taxes apply to all beneficiaries with an annual household income of more than $25,000, and most pay taxes on at least 50% of their benefits. Beneficiaries with lower incomes pay less taxes.

Social Security tax cuts would hurt low-income retirees and younger generations

American social security is in danger of being exhausted in the next decade without congressional action. The fund is largely financed through payroll taxes to which Americans contribute throughout their careers.

A report published in October by the nonpartisan Committee for a Responsible Federal Budget detailed Trump’s campaign promises – which also Eliminating taxes on tips, cutting some income taxes, expanding deportations and imposing tariffs will take their toll on the Social Security Fund, making it “insolvent” within the next six years. That’s three years earlier than the current Congressional Budget Office estimate.

The report states that these policies would also lead to a 33% reduction in benefits by 2035, a 10% increase over what the Congressional Budget Office predicts under current law.

Lee said low-income boomers and younger generations will likely bear the brunt of these cuts.

Low-income boomers living on Social Security already pay less income tax, so they wouldn’t see the benefits Trump promised. Lee said many have no other retirement savings to fall back on if their benefits are cut.

He added that older Americans who are wealthy or middle class would feel less stress from Social Security cuts and could benefit from Trump’s tax plan in the short term.

“It would help middle-class people, people who have the luxury of having a 401(k) or an IRA and have multiple sources of retirement income,” Lee said. “But the people who are going to hurt the most are people who don’t have that traditional retirement income.”

Lee said it was possible that younger generations would receive lower Social Security benefits, forcing them to rely more heavily on retirement savings.

To be fair, any changes Trump hopes to make to the tax or welfare systems would have to be approved by Congress. What works in its favor is that the The Senate will have a Republican majority. (Votes for House representatives are still being counted.) Lee noted that tax funding isn’t the only challenge facing Social Security: People are living longer, which means more benefits are needed per person.

As for other retirement funds, such as 401(k) accounts and investments, it is unclear what impact a second Trump term will have. The president-elect plans to impose tariffs on foreign goods and implement broad tax cuts, a move likely to fuel inflation and raise the cost of living.

With the future of Social Security uncertain, Lee says, it’s important that retirees create a strong financial plan.

“There’s still a lot of planning we can still do,” Lee said. “Government policy – ​​we really have no influence on that. So we just have to control what we can control.”

Are you dependent on social security after your retirement? Will you adjust your retirement plans based on Trump’s return to office? Please contact this reporter at [email protected].

Correction: Nov. 11, 2024 — An earlier version of this story used an outdated average for monthly Social Security checks. The Social Security Administration said the average monthly check for retired workers was $1,907 in January but $1,924.35 in October.