- President Trump wants to cut taxes on Social Security benefits, affecting current and future beneficiaries.
- Experts have warned that these cuts could deplete Social Security funds three years sooner than expected.
- Low-income baby boomers and young people will be hardest hit by Mr. Trump's proposal.
Donald Trump plans to make changes to America's Social Security system upon his return to the White House In January.
During his campaign, the president-elect promised to cut taxes on Social Security benefits during his second term.
“People on Social Security are being killed,” Trump said in August. “One of the things I'm working on is to exempt seniors on Social Security from paying taxes. It's going to happen soon,” he said on “Fox & Friends” in August.
For some baby boomers, lower Social Security taxes could mean higher monthly checks in the short term. But experts predict that the Social Security tax cuts and President Trump's other campaign promises could quickly deplete the nation's Social Security funds. That would jeopardize benefits for low-income retirees and younger generations who may rely on that income as they age.
Taylor Lee, a certified financial planner at Belmont Capital Advisors, said President Trump's Social Security tax cuts were “designed to help retirees, but those who rely on Social Security the most will be hurt.” “These are the people who are doing it,'' he told BI.
More than 72 million Americans receive Social Security, and the estimated average monthly check is: $1,907 1 month, according to the Social Security Administration. Americans can start collecting Social Security benefits at age 62 or wait until full benefits begin at age 67, the national retirement age.
Trump's campaign promise comes as Business Insider heard from seniors with limited retirement savings, many of whom struggle to afford housing, groceries and other necessities on fixed Social Security incomes. That's what it means. Income taxes on Social Security apply to all beneficiaries whose annual household income exceeds $25,000, and in most cases at least 50% About their advantages. Beneficiaries with lower incomes pay less tax.
Social Security tax cuts will hurt low-income retirees and young people
US social security will run out Absent Congressional action, that will be the case for the next 10 years. This fund is primarily funded by payroll taxes that Americans contribute throughout their careers.
report A report released in October by the bipartisan Committee for a Responsible Federal Budget states that President Trump's campaign promise: This includes abolishing taxes on tips, reducing some income taxes, expanding deportations, and imposing customs duties, which will severely damage the Social Security Fund and put it in “indebtedness” within the next six years. Probably. This is three years earlier than the Congressional Budget Office's current estimates.
These policies also lead to a profit of 33%. benefit cut In 2035, it will be 10% higher than projected by the Congressional Budget Office under current law.
Lee said low-income boomers and younger generations are likely to bear the brunt of these cuts.
Low-income boomers living on Social Security already pay less in income taxes, so they won't receive the benefits Trump promised. Lee said many people have no other retirement savings to fall back on if benefits are cut.
He added that wealthy and middle-class older Americans are less stressed by Social Security cuts and may benefit from President Trump's tax plan in the short term.
“It's going to help middle-class people, people who can afford to own a 401(k) or IRA and have multiple sources of retirement income,” Lee said. “But the people who will be hurt the most are those who don't have traditional retirement savings.”
Lee said younger generations may have fewer Social Security benefits and need to rely more on retirement savings.
To be sure, any changes President Trump wants to make to taxes and Social Security would require approval from Congress. What works in his favor is Republicans will have a majority in the Senate. (Votes for House members are still being counted.) Lee added that tax funding is not the only challenge facing Social Security. People are living longer, which means more resources are needed for benefits per person.
It's unclear how Trump's second term will affect other retirement funds, such as 401(k) accounts and investments. The president-elect plans to impose tariffs on foreign goods and make widespread tax cuts, measures that are likely to fuel inflation and cause the cost of living to soar.
With the future of Social Security uncertain, Lee said it's important for retirees to have a strong financial plan.
“There's still a lot of planning we can do,” Lee said. “We can't influence government policy, so we just control what we can control.”
Are you relying on Social Security in retirement? Are you adjusting your retirement plans based on President Trump's return? If so, contact this reporter. allisonkelly@businessinsider.com.