For an overwhelming majority of retirees, Social Security represents more than just a monthly check. It’s a financial lifeline that they’d struggle to make do without.
According to the Center on Budget and Policy Priorities, Social Security pulled 22 million people above the federal poverty line in 2023, more than 16.3 million of which were aged 65 and over. Meanwhile, 23 years of annual surveys by Gallup have found that 80% to 90% of retirees rely on their Social Security income, in some capacity, to cover their expenses.
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Nothing is more important to America’s aging workforce than preserving the financial health of Social Security — and strengthening the program begins at the top, with President Donald Trump.
Though Trump has primarily maintained a hands-off approach with Social Security and focused on efficiency-based cost-cutting initiatives, he has one mammoth change in mind that would, ultimately, give half of all retired-worker beneficiaries a raise. Unfortunately, it’s also a proposal that’s ripe to backfire.
President Trump delivering his State of the Union address. Image source: Official White House Photo.
America’s leading retirement program is in desperate need of reform
In January 1940, the very first Social Security retired-worker benefit check was mailed. Every year since then, the Social Security Board of Trustees has published a report that intricately details the inner workings of the program. These annual reports allow the public to peruse how every dollar in income is collected, as well as trace where those dollars end up.
But what tends to be even more insightful with these annual reports are the forward-looking projections. These forecasts take into account ongoing demographic shifts, along with changes to fiscal and monetary policy, to determine how financially sound Social Security will be 75 years following the release of a report (i.e., the Trustees’ definition of the “long term”).
In each of the last 40 years, the Trustees have pointed to a long-term funding obligation shortfall. Put plainly, projected income collected in the 75 years following a report isn’t expected to be sufficient to cover outlays, which primarily includes benefits but also accounts for the administrative expenses to oversee the program. As of the 2024 Trustees Report, this 75-year funding shortfall stood at $23.2 trillion — and this figure has been growing with consistency over time.
The more pressing concern is the asset reserves of the Old-Age and Survivors Insurance Trust Fund (OASI), which are estimated to be depleted by 2033. The OASI’s asset reserves represent the excess cash built up since inception that hasn’t been paid out as benefits or used to cover administrative expenses. This excess income is currently invested in special-issue, interest-bearing government bonds, as required by law.
If lawmakers fail to act and the OASI’s asset reserves run out, retired workers and survivors of deceased workers would be facing an up to 21% reduction in their monthly benefit eight years from now.
The OASI’s asset reserves are on pace to be depleted by 2033. US Old-Age and Survivors Insurance Trust Fund Assets at End of Year data by YCharts.
President Trump wants to give roughly half of all retired-worker beneficiaries a raise
Donald Trump oversaw a number of Social Security changes during the first 100 days in office of his second nonconsecutive term. However, these efficiency-driven measures aren’t going to put a dent in either the $23.2 trillion long-term funding shortfall, or meaningfully address the expected exhaustion of the OASI’s asset reserves in 2033.
But the president does have a proposal to get more money into the pockets of seniors.
In a July 31 social media post on Truth Social, then-candidate Trump proclaimed in all capital letters, “Seniors should not pay tax on Social Security.”
In recent weeks, he’s doubled down on his sentiment that retirees shouldn’t be taxed on the Social Security benefits they receive. While speaking at a town hall event, the president said,
In the coming weeks and months, we will pass the largest tax cuts in American history — and that will include no tax on tips, no tax on Social Security, and no tax on overtime. It’s called “The One, Big, Beautiful Bill.”
In 1983, with Social Security’s asset reserves virtually exhausted, a bipartisan Congress passed, and then-President Ronald Reagan signed, the Social Security Amendments of 1983 into law. This amendment gradually increased the full retirement age and payroll taxation on working Americans, as well as introduced the utterly despised tax on benefits.
When the taxation of benefits went into effect in 1984, up to 50% of benefits could be subjected to the federal tax rate when provisional income (adjusted gross income + tax-free interest + one-half of benefits) surpassed $25,000 for single filers and $32,000 for jointly filing couples. A decade later, a second tier was added allowing up to 85% of benefits to be subject to federal taxation if provisional income for single filers and couples filing jointly topped $34,000 and $44,000, respectively.
When this tax went into effect in 1984, it was expected to affect approximately 10% of all senior households. But because these income thresholds haven’t been adjusted for inflation since their respective inceptions decades ago, around half of all senior households now pay some level of tax on the benefits they receive.
If President Trump is successful in eliminating this hated tax, he would be giving roughly half of all retirees a raise (in the sense that they would no longer have to pay tax on some portion of their benefits).
Image source: Getty Images.
Donald Trump’s well-intentioned proposal is poised to backfire
On the surface, there would be plenty of support from current and future retirees to end the taxation of benefits. An overwhelming majority of retirees in an informal poll conducted by The Senior Citizens League believe Social Security benefits shouldn’t be taxed.
Unfortunately, this well-intentioned plan to put more money into the pockets of around half of all current Social Security retirees would be a short-term relief that leads to an even bigger long-term issue.
To combat the OASI’s declining asset reserves, America’s leading retirement program needs every cent in income it can collect. At the moment, Social Security generates its income three ways:
- More than 91% of the $1.35 trillion collected in 2023 came from the 12.4% payroll tax on earned income, which includes wages and salary but not investment income. In 2025, all earned income up to $176,100 is subject to the payroll tax.
- Approximately 5% derives from the interest income earned on the OASI’s and Disability Insurance Trust Fund’s (DI’s) asset reserves, which as previously noted are invested in interest-bearing government bonds.
- The remainder of Social Security’s income comes from taxing Social Security benefits.
The good news is that the lion’s share of Social Security’s income will continue to be sourced from the payroll tax. As long as Americans keep working and paying their taxes, there will always be funds for the Social Security Administration to distribute to eligible beneficiaries.
On the other hand, the program’s interest income will dwindle as the OASI’s asset reserves are steadily exhausted. The interest income generated from the DI’s asset reserves represents a very small piece of the pie.
Removing the tax on benefits, with Social Security’s interest income expected to diminish over time, would financially cripple the program. Based on estimates from the 2024 Trustees Report, the income generated from taxing benefits is expected to jump from $50.7 billion in 2023 to $132.8 billion in 2033.
While half of all retirees — the half with the highest provisional income — would enjoy a brief raise, the OASI’s asset reserves would be drained even faster without income from the taxation of benefits. In plain English, Trump’s plan would speed up the benefit-cut timeline and potentially increase the percentage benefits would need to be reduced by (i.e., more than the current estimate of a 21% cut) to sustain the program for 75 years.
It goes to show that what’s popular isn’t always the best solution.
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Why does the article purely focus on the revenue in and revenue out of the same vessel
There are other options like large corporations paying there share of tax unlike individuals who have paid tax if not all most of there working life ,should not be paying tax on retirement
This is crap, don’t believe it for a second. Just like the WEF, NWO Bankers are knee Capping the Fed and Trump this spew is doing the same dis service to our elderly with the SSA. Just slinging it and see if it sticks!
As always the article missed the most important part, Trump is using the Doge savings, not the SS account!
Why does the government rob social security to pay Welfare? Social security was never designed to be robbed by officials to give away our hard earned money to welfare recipients. This robbing of Social Security’’s trust must stop immediately.
If Congress and these liberal judges would leave the president alone, he could get a lot more done than anyone ever imagined. Of course, they don’t want to leave him alone because they don’t want him to get credit for anything. But America needs to get rid of yet more of overwaste and spending in congress, not just what helps people. If Congress would educate themselves and sit down and look at the real FACTS and not be so afraid of the media, they may get things accomplished. The president was elected for the purpose he’s trying to accomplish but sadly we have some office holders who have no knowledge of the world or economics. It would help if young people and the country were educated in economics as well. We have so much in this govt that does not even need to exist. Hope DOGE continues their job. Some of these organizations the country would likely improve esp financially if they were gone.
Hear, Hear!
JP, it is essential that Congress and the Activist Judges do everything in their power to marginalize Trump. Trump’s pro-America policies present a clear and present danger to our esteemed, precious, holy, and sacred Deep State, which has our best interests at heart as they transform America into a Marxist Centrally-Controlled Global Enterprise.
You are crazy?
I am not sure whether whoever-analyzed-the depletion-in-30yrs-or-so of social security assets even factored in the fact that the number of beneficiaries even dwindle faster than the contributors to the system because the beneficiaries in themselves are the closest to passing away due to age. Or did they think the ‘n’ beneficiaries are an eternally constant factor.
The average lifespan of Americans is rising, and has been rising, over the decades. I have relatives in their 90’s who have been pulling Social Security benefits for almost 30 years. I don’t begrudge them those benefits; what I’m trying to point out is that your idea that beneficiaries “…dwindle faster than the contributors to the system…” is flawed. Sure, lots of seniors die in their 60’s and 70’s, but an appreciable number make it well into their 80’s and 90’s. We need to secure THEIR benefits!
Well if you trim to nothing the NGO’s are taking from the US Tax Payer and use that to fuel the Socialist Programs we were designed to live under there would be No Reason for an income Tax. Just like Tariffs. It will work if you stop Commie Graft!
Have no funds to invest so this whole blathering is a waste of time for those of us who never had the funds anyway!!
If Trump and Congress really want to help save social security, they will support the elimination of the FICA income cap so that the rich also pay their fair share. There is now a bill in Congress to allow this, which the rich will absolutely oppose along with all the congressional members they control. Elimination of the tax on social security benefits only helps those 50% of beneficiaries who are earning extra money above what SS provides and does nothing for the others, who don’t make enough to pay any taxes anyway! While Trump claims the no tax on SS benefits are helping the lower class, it’s doing nothing whatever in that regard. ELIMINATE THE FICA CSAP AND SAVE SS FOR DECADES TO COME!!!
I tire of the incessant banter of the “rich” not paying their fair share. The truly wealthy do not have an income to tax. They exist on returns on investments which are not treated as “income” for tax purposes, but capitol gains, and is taxed differently. You don’t remember the old story told allegedly by warren buffet, that his secretary pays more in income tax than he did. He being at the time one of the world’s richest men-just illustrating the fact the really rich don’t pay taxes, and it is legal-so they DO pay their “mandated” fair share-just as we do.
The problem is that congress is stealing the money from the account and just leaving an IOU in it’s place-and never mind on what. Then they get to stand up and cry that the rich are the one’s at fault-most being rich, themselves. There needs to be no more tax, congress just needs to restore the money taken, with the interest it would have accrued in that time. Furthermore, how much better off would that account be if the $900 million sent to Ukraine went into the SS coffers, instead.
There aren’t many left on Social Security from the Silent or Greatest generations. The Baby Boomer generation is also aging fast and let’s not forget this was the generation who smoked pot in the 70s and did cocaine in the 80s. They’re not going to last long. They also are a large amount of people. My generation, Generation X for the most part is still working. They can run the numbers all they want but it really isn’t as bad as they make it out to be. I’m on Social Security and this tax break will not benefit me. That’s okay though. I’m not worried.
How are you on SS as a Gen-Xer? You wouldn’t be old enough. The last of the boomers was born in 1964, and they are not eligible yet, either.
Hey Lori, looks like you may snorting a bit yourself… There are many possible fixes to both the income and expense side of SS. Congress just needs to step up and get it done…
I, as a SS recipient am just a little older than the accepted time frame for boomers. I am 80 years old and in reasonably good health and I expect to live at least until my 90’s unless I’m called home sooner by some unexpected event. I absolutely depend upon the SS benefits I receive. I worked all of my life from 12 to 60 (mandated retirement for my profession) and contributed to SS for 48 years. I always expected that I would not need SS as I was expecting a great pension and I was building and IRA etc. Then 2007 came. The pension was cancelled suddenly and unexpectedly. OK, I could take the hit, I had my investments. Then 2008 came. Between me drawing now on my investments and the stock market crash of those years, my investments mostly disappeared at least down to the point that I was using them faster than they could replenish. By the time all this happened I was getting older and jobs were scarce for me. I started a small business. I worked at that for 7 years. It helped, but I had to spend 10 hours a day in the hot sun and at 75 I decided I wasn’t benefiting enough so I sold the business. Then I sold a property that had appreciated nicely over the years, but I had been forced to use it as rental property. So when I sold it for a nice capital gain, uncle Sam came in and said we need a lot of that gain (A LOT). Then we got Biden. The inflation caused by his admin has once again put me in a losing situation. We are surviving, but it is requiring us to live extremely frugally, like never eating out, never traveling, not being able to contribute much to the military based charities I had always supported etc. We have our good health, but if we get another hit to our purchasing power, we will be in trouble. In 2033 I will be 99 if I can survive that long, but these “Golden” years have turned to tin. As someone else stated here, some of the money spent on issues that the govt has no business wasting money on could easily prop up the SS program sufficiently to avoid the problems it faces. Don’t support foreign wars, don’t spend money on gender studies in far away places etc. Enough said. I have vented, thanks for listening.
CUT FOREIGN AID TO THE BONE.
The biggest recipients of foregn aid are………….the countries that hate us the most!
And, most likely, the cut that those to the NGOs that filters out to others. I would like to see what actually makes it to the supposed “foreign” aid.
“They” said we would never pay tax on tax, but we have federal excise tax (tires, commercial truck mirrors) plus state & county tax. When our [ostensible] political leaders advise us there will be a small increase in costs, why is it typically far more than what they refer to as a huge reduction?
As the story goes, when you rob Peter to pay Paul, you’ll just wind up with a sore Peter.
No taxes but tariffs, and SS will get a boost too. You’ll see. And, Hilary, Obama, George Soros, Fauci, and the rest (all 463,000 others) are going to jail or worse.