The year 2025 marks the beginning of a period when a large percentage of Americans would be concerned about the future of Social Security: You probably are. The American Association of Retired Persons (AARP) projects that by 2035, the trust funds for Social Security will be depleted. So, it is only natural for seniors in this program to be concerned. What is the current state of affairs, and what does the newly-elected President Donald Trump have in place to address any of these problems?
What is the current status of social security?
Social Security is not going bankrupt, but it is facing financial challenges. The two main programs in the trust funds–Old-Age and Survivors’ Insurance (OASI) and Disability Insurance (DI)–will run out by 2035. After that, money from payroll taxes will cover only approximately 83% of scheduled benefits, and that percentage is projected to decrease to 73% by 2098, according to the Social Security Administration (SSA). This means that if nothing is done, you and other beneficiaries will get less social security pay in the future.
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How does president-elect Trump plan to address social security’s challenges?
When the town hall convened in December 2023, President-elect Trump said that “You don’t have to touch Social Security.” He opined that the U.S. oil and gas reserves could be used as a revenue source to help in solving the fiscal problems of the country, including financing Social Security. However, Trump is yet to give specific details on how this can work or be sustained.
Could increased oil and gas drilling fund social security?
Analyses indicate that dedicating revenue from expanded oil and gas drilling to Social Security would cover less than 4% of its projected shortfall. This suggests that while such measures might contribute, they wouldn’t be sufficient to fully address the program’s financial challenges.
What are the potential impacts of Trump’s other fiscal proposals on social security?
Some of President-elect Trump’s proposals could inadvertently exacerbate Social Security’s financial issues:
- Eliminating federal taxes on Social Security benefits, overtime, and tips: This could reduce revenue for the program, potentially accelerating the depletion of its trust funds.
- Implementing steep tariffs on imports: Such measures might lead to higher inflation, resulting in increased cost-of-living adjustments (COLAs) and greater outflows from Social Security.
- Deporting unauthorized immigrants: This could decrease the number of workers contributing payroll taxes, further reducing the program’s income.
What does this mean for your social security benefits?
While President-elect Trump has expressed a commitment to preserving Social Security, the lack of detailed plans leaves uncertainty about how he intends to address its financial challenges. Some of his proposals might even hasten the program’s insolvency, potentially leading to benefit reductions sooner than currently projected.
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What can you do to prepare?
Given the uncertainties surrounding Social Security’s future, it’s prudent to consider additional retirement planning strategies:
- Diversify your retirement savings: Explore options like 401(k) plans, IRAs, or other investment vehicles to supplement your expected Social Security benefits.
- Stay informed: Keep up with legislative developments related to Social Security to understand potential impacts on your benefits.
- Consult a financial advisor: Seek professional advice to create a retirement plan tailored to your individual needs and circumstances.
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