What's Happening
1 hour ago

3 Scorching-Hot Artificial Intelligence (AI) Stocks That Can Plunge Up to 72%, According to Select Wall Street Analysts

foolfool.com
1 hour ago

Jensen Huang Is Selling Nvidia Stock Again. Should You Do the Same?

foolfool.com
1 hour ago

1 Dividend Giant Yielding Over 9%, With Big Things Coming

foolfool.com
1 hour ago

Is It Ever a Good Idea to Claim Social Security at 62?

foolfool.com
1 hour ago

The Stock Market Has Only Done This 6 Times Since 1950. History Says It Signals a Big Move in the S&P 500 This Year.

foolfool.com
1 hour ago

3 Absurdly Cheap Growth Stocks to Load Up On Right Now

foolfool.com
1 hour ago

'PARC' Stock Coinbase Hits $100 Billion Market Capitalization As Bitcoin Rally Powers Crypto-Linked Equities

benzingabenzinga.com
2 hours ago

Prediction: XRP (Ripple) Will Be Worth This Much in 10 Years

foolfool.com
2 hours ago

3 Warren Buffett Stocks to Hold Forever

foolfool.com
2 hours ago

These Stocks Have Soared 700% or More in the Last 5 Years and Could Still Crush the Nasdaq by 2030

foolfool.com
2 hours ago

1 Unstoppable Growth Stock to Buy With $3,000

foolfool.com
2 hours ago

Washington Breaking The Global Economy? Economist Mohamed El-Erian Warns The US Now 'Resembles A Developing Nation'

benzingabenzinga.com
2 hours ago

EU Hits Back With $84 Billion Tariff Threat As Trump Ramps 30% Levy Plan: Boeing, Whiskey And Autos Now Squarely In The Crosshairs

benzingabenzinga.com
2 hours ago

Want to Generate at Least $1,000 in Passive Income Per Year? Invest $26,000 in This Dividend King Stock.

foolfool.com
2 hours ago

Troops Inc Dips In After Hours Trading After Shooting Up 104% In Monday's Explosive Session

benzingabenzinga.com
2 hours ago

Wall Street's Premier Stock-Split Stocks of 2025 Have Gained Up to 137,000% Since Their IPOs and Show No Signs of Slowing Down

foolfool.com
2 hours ago

Prediction: 2 Stocks That'll Be Worth More Than Navitas Semiconductor 2 Years From Now

foolfool.com
2 hours ago

KFC Launches Comeback Campaign With Free Chicken, Fill-Ups And Colonel Sanders Reboot: Yum! Brands Bets Big On Revival Amid Fried Chicken Turf War

benzingabenzinga.com
2 hours ago

3 Top High-Yield Dividend Stocks I Just Bought to Boost My Passive Income

foolfool.com
2 hours ago

Should You Buy Johnson & Johnson Stock Before July 16th?

foolfool.com

President-Elect Donald Trump’s Social Security Plans Could Mean Bigger Benefit Cuts Are Coming. Here’s What Retirees Need to Know Before January 20

Markets reacted strongly to the reelection of Donald Trump. In the week that followed Nov. 5, the S&P 500 was up about 3.7%. While the likely economic impact of all of Trump’s campaign promises is mixed, the stock market appears to believe that Trump will follow through with those that boost business, like cutting corporate taxes, while not following through with potentially damaging promises like hiking trade tariffs.

How this plays out will have broad implications in the lives of all Americans, but for the millions of Americans who are retired or will soon be so, Donald Trump’s Social Security plans could have an even bigger impact. The program is already on a path toward financial distress, but according to a recent analysis by the Committee for a Responsible Federal Budget (CRFB), many of the proposals put forth on the campaign trail by the President-elect could exacerbate the issues. First, however, let’s take a look at the state of the program.

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. See the 10 stocks »

Social Security is on the path to insolvency

Social Security is designed as a “pay-as-you-go” system. The payroll taxes that working Americans pay into the program are directly paid out to the retirees enrolled in it. For many years, more taxes were paid into the system than were paid out, leading to a surplus. Now, however — largely because of changes in demographics, especially the falling birth rate and the retirement of the Baby Boom generation — Social Security is running a deficit; more money is paid out than is collected in payroll tax and other sources each year.

For the time being, this isn’t affecting benefits. The program can draw on the surplus it collected in years past to bridge the gap. If nothing changes, however, by 2035, this will no longer be true. At that point, the reserves will be tapped, and the program can only pay out what it brings in, which, according to the Congressional Budget Office (CBO), could mean a 23% across-the-board cut to retirees’ benefits without action from Washington.

Donald Trump’s plans for Social Security could mean this happens sooner

Although Donald Trump has promised to “not touch” Social Security and that beneficiaries will “get what they’re getting,” many of his proposed policies would have an effect on the program’s bottom line, according to the analysis by the CRFB.

Some proposals would reduce the amount of revenue flowing into the program, like eliminating taxes on Social Security benefits, tips, and overtime, or major deportation programs. Others would increase the amount of benefits paid out without increasing retirees’ relative buying power, like imposing inflationary tariffs that would lead to increased cost of living adjustments (COLAs).

When taken in aggregate, the CRFB estimates these policies will accelerate Social Security’s insolvency timeline by three years. That means benefit cuts as early as 2032, just seven years from now. By 2035, the shortfall would be increased to 33% compared to the current estimate of 23%. In the CRFB’s worst-case scenario, benefit cuts in 2035 would be as much as 36%, meaning beneficiaries would only receive 63% of what they would if the program remained solvent.

All told, the CRFB estimates the proposals will lead to a 10-year shortfall of between $1.3 trillion and $2.8 trillion.

There’s a lot at stake

More than 70 million retired Americans received benefits last year. For many, it provides a measure of security as a meaningful supplement to personal savings. For others, it’s almost all they have; for the bottom 40% of earners, Social Security accounts for 80% of post-retirement income. These Americans would be massively impacted by accelerated and increased benefit cuts.

Now, the numbers here are from a single source, and they are predictions, not inevitabilities. What promises are kept, how they are implemented, and their ultimate impact all remain to be seen. There is also the chance that any of these proposals would be balanced by others that would strengthen the program and offset any potential financial damage.

Regardless, it’s clear that personal retirement savings and employee-sponsored programs like 401(k)s are more important than ever. Smart retirement planning must include the possibility that significant cuts will occur in the not-so-distant future.

The $22,924 Social Security bonus most retirees completely overlook

If you’re like most Americans, you’re a few years (or more) behind on your retirement savings. But a handful of little-known “Social Security secrets” could help ensure a boost in your retirement income. For example: one easy trick could pay you as much as $22,924 more… each year! Once you learn how to maximize your Social Security benefits, we think you could retire confidently with the peace of mind we’re all after. Simply click here to discover how to learn more about these strategies.

View the “Social Security secrets” »

The Motley Fool has a disclosure policy.

Related Posts

Key Points Filing for Social Security at 62 will typically result in a reduced monthly benefit for life. There are some scenarios where claiming benefits

My friend Lauren is one of the most responsible people I know. She budgets and avoids flashy spending. But last year, a string of bad

Key Points President Trump promised to end taxes on Social Security and the White House says the One, Big, Beautiful Bill makes good on that

Key Points Social Security’s Trustees just delivered some bad news about the state of the program’s finances. Benefit cuts may be closer than previously anticipated.