For most current and future retirees, Social Security income isn’t a luxury or optional. It’s a source of income that most will rely on to cover their expenses as they age.
In each of the previous 23 years, national pollster Gallup has conducted surveys to gauge how reliant retirees are on the Social Security income they receive. Between 80% and 90% of respondents, including 88% last year, noted it was needed, in some capacity, to make ends meet.
Despite Social Security being foundational to the financial well-being of our nation’s aging workforce, the program’s own foundation is anything but sound. The financial outlook for this program is deteriorating, and the American public is counting on its elected officials, which includes President Donald Trump, to strengthen Social Security.
Unfortunately, not all solutions — even those made with good intentions by President Trump — improve Social Security’s outlook.
President Donald Trump signing paperwork in the Oval Office. Image source: Official White House Photo by Shealah Craighead, courtesy of the National Archives.
Before digging into the specifics of President Trump’s Social Security plan, it’s important to understand how America’s leading social program got to where it is now.
Since 1940, the Social Security Board of Trustees has released an annual report that intricately details how the program generates income and where every dollar of its outlays (i.e., benefits and, to a lesser extent, administrative expenses) is directed.
Often the more valuable aspect of these annual Trustees Reports is their forward modeling. The Trustees account for changes in fiscal and monetary policy, along with ongoing demographic shifts, to assess the financial stability of Social Security payouts 75 years into the future. This long-term forecast has been estimating a funding obligation shortfall for 40 consecutive years. In the 2024 Trustees Report, this 75-year cash shortfall clocked in at $23.2 trillion.
Although this is a big number, the scarier statistic is the expected depletion of the Old-Age and Survivor’s Insurance Trust Fund’s (OASI’s) asset reserves by 2033. If the OASI’s asset reserves run dry, retired workers and survivor beneficiaries could see their Social Security checks slashed by up to 21% in eight years.
To be as clear as possible, the OASI wouldn’t be bankrupt or insolvent if its asset reserves were depleted. Rather, it would mean the existing payout schedule, including annual cost-of-living adjustments (COLAs), isn’t sustainable.
The culprit for Social Security’s woes has nothing to do with social media message board myths of congressional theft or undocumented workers receiving traditional Social Security checks. Rather, it’s the result of sustained demographic shifts, which includes rising income inequality, a historically low U.S. birth rate, and a 58% decline in legal net migration into the U.S. over 25 years.
The OASI’s asset reserves are forecast to be gone by 2033. US Old-Age and Survivors Insurance Trust Fund Assets at End of Year data by YCharts.
With a clearer understanding of the challenges facing America’s leading retirement program, let’s turn to President Donald Trump’s three separate Social Security proposals.
While on the campaign trail, prior to his November election, Trump repeatedly promised not to touch Social Security. In other words, he pledged not to propose/enact major reforms that would potentially alter the benefits current and future retirees receive.
Though it’s been documented for decades that Social Security’s financial outlook is weakening, lawmakers tend to avoid this dubbed “third rail of politics.” Any significant changes to Social Security would make at least some people worse off than they were before. This could cost a president and/or his party votes in an upcoming election. Doing nothing and maintaining a hands-off approach is the easiest way to avoid angering voters.
President Trump’s second Social Security proposal is to make the program more efficient. In a December 2024 interview with Kristen Welker at Meet the Press, then-president-elect Trump responded to a question regarding the possibility of Social Security cuts by stating:
I said to people we’re not touching Social Security, other than we make it more efficient. But the people are going to get what they’re getting.
During Donald Trump’s first term in the White House, all four of his annual presidential budgets called for efficiency-based cuts to Social Security. One example would have reduced retroactive benefits to workers with disabilities to six months from 12 months. These efficiency-based cuts, which would have been recognized over 10 fiscal years (the federal government’s fiscal year ends on Sept. 30), totaled between $24 billion and $72 billion in reduced outlays, based on presidential budget projections.
The third aspect of President Trump’s Social Security plan involves the removal of the taxation of benefits. In a July post on social media platform Truth Social, Trump wrote, “Seniors should not pay tax on Social Security.” Getting rid of this tax on benefits would be extremely popular with seniors and would increase Social Security checks for around half of all retirees.
Following the passage of the Social Security Amendments of 1983, up to 50% of benefits could be exposed to the federal tax rate if provisional income (adjusted gross income + tax-free interest + one-half benefits) surpassed $25,000 for single filers and $32,000 for couples filing jointly. In 1993, a second tax tier was added that made up to 85% of Social Security benefits applicable to federal taxation if provisional income crested $34,000 for single filers and $44,000 for jointly filing couples.
Last month, a White House correspondent confirmed with CNBC that the president is planning to fulfill his campaign promise to do away with the taxation of benefits.
Image source: Getty Images.
While there’s little doubt the president’s three-pronged approach to Social Security would likely keep voters happy, what’s popular and well-intentioned isn’t always what’s financially best for Social Security. The grim reality is that none of these three proposals would meaningfully improve the program. In fact, two of the three would make things decisively worse.
For instance, doing nothing is the safe approach that most presidents and members of Congress choose. However, doing nothing fails to address the $23.2 trillion (and growing) long-term funding shortfall, and it doesn’t alter the projection of the OASI exhausting its asset reserves in eight years. By kicking the can, President Trump and Congress are only making an eventual solution even costlier.
The one aspect of President Trump’s Social Security plan that wouldn’t make things worse is proposed efficiency-based cuts. But the caveat to efficiency-based cost-cutting is that it hardly moves the needle.
Estimates from the 2024 Trustees Report pegged the combined outlays for the OASI and Disability Insurance Trust Fund at $19.09 trillion from 2024 through 2033. Meanwhile, Trump’s budget proposals during his first term would have reduced outlays by, at most, $72 billion over a decade (fiscal 2018 through fiscal 2027). Efficiency-based reductions simply don’t do enough to make a dent into Social Security’s short- or long-term funding issues.
But the biggest reality-check of all would be if Donald Trump eliminated the tax on benefits.
Social Security only has three sources of funding:
The 12.4% payroll tax on wages and salary between $0.01 and $176,100, as of 2025.
The interest income earned on its asset reserves, which are invested in special-issue government bonds, as required by law.
The tax on benefits.
Ending the tax on benefits would remove one of the program’s three sources of income. Interest income isn’t guaranteed, either, with the OASI’s asset reserves being whittled away.
Removing the taxation of benefits would lower estimated income by $950 billion to $1.45 trillion over a decade, based on various estimates. In other words, it would speed up the timeline to the OASI’s asset reserve depletion date and potentially increase the amount benefits need to be cut for retired workers and survivor beneficiaries.
Strengthening Social Security will require some tough decisions. President Trump’s Social Security plan simply doesn’t cut it.
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The Grim Reality of President Donald Trump’s Social Security Plan was originally published by The Motley Fool
