When President-elect Donald Trump takes office starting Jan. 20, major changes could impact the lives of Americans if he begins to move forward on following through with ambitious election campaign promises.
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For retirees, some of the biggest changes could relate to Social Security. Here’s how benefits could be impacted, based on statements and policy proposals Trump has made in the past.
Benefit amounts
First and foremost, retirees who are worried about their benefits in the near term have no real reason to be concerned.
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Trump has repeatedly and vocally made clear that he has no interest in reducing retirement benefits or in moving the full retirement age to later, which is one common proposal for shoring up the program’s finances.
“I will not cut one cent from Social Security or Medicare,” Trump boldly promised while on the campaign trail.
However, he made similar pledges during his 2016 presidential campaign, which didn’t pan out exactly as many expected.
Taxes on benefits
Retirees could actually get a financial boon — at least temporarily — under Trump if he follows through on his promise to eliminate taxes on Social Security benefits.
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Currently, retirees could be subject to tax on a portion of their benefits once provisional income hits $25,000 for single tax filers or $32,000 for joint tax filers. Trump repeatedly vowed on the campaign trail to make these benefits non-taxable.
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This would restore the tax-free status benefits enjoyed before 1983 amendments aimed at shoring up the program. The change to the tax rules has long been a point of contention, as benefits are subject to a yearly cost-of-living adjustment, while the thresholds at which taxes kick in have remained unchanged. So, a growing amount of seniors have been dinged by the IRS over the years.
Congress would have to take action to make this change, so there’s no guarantee it will happen, although it was one Trump’s signature campaign promises.
Long-term funding
Finally, there’s some potentially bad news for retirees. If Trump fulfills a few key policy goals, Social Security’s long-term finances could significantly worsen, according to the nonpartisan, nonprofit group Committee for a Responsible Federal Budget (CRFB). This can happen if deportations are increased, taxes on certain other kinds of income are eliminated, tariffs are imposed and taxes on Social Security benefits go away.
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A shortfall in Social Security funds was already projected as late as 2035, afterwhich there would be a reduction in benefits. The CRFB estimates Trump’s proposals would advance insolvency by three years.
Retirees should be aware that they may benefit in the short term from Trump’s policy proposals but need to carefully research the downstream impact to make informed financial choices in the future.
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This article provides information only and should not be construed as advice. It is provided without warranty of any kind.