President-elect Donald Trump's plans to protect Social Security benefits could give retirees more money in their pockets but could also deplete the program's funds more quickly over the long term.
Currently, the main trust fund that supports Social Security is set to run out by 2034, according to a projection by the Congressional Budget Office. At that point, benefits will be cut by 23%, the research agency said.
That has left many Americans concerned that Social Security will not last long enough for their retirement, and the effect of Trump's proposals could add to those worries.
On the campaign trail, Trump said he would not change the retirement age or cut Medicare or Social Security funding if elected.
Individuals can claim Social Security retirement benefits starting at 62 years old. However, claiming before reaching full retirement age (FRA) permanently reduces benefits. Currently, anyone born in 1960 or later must be 67 years or older to receive their full benefits.
The president-elect also proposed excluding Social Security payments from income taxes.Currently, about 40% of Social Security beneficiaries pay federal taxes on their benefits. These beneficiaries are typically retirees who receive other wages or taxable retirement pensions. According to the Tax Policy Center, this cut would primarily help beneficiaries who earn between $63,000 and $200,000.
However, experts say Trump's tax cuts could widen the budget deficit and hasten the demise of the Social Security Trust that funds the program's benefits.
Overall, Trump's tax proposals are estimated to increase the 10-year budget deficit by $3 trillion, assuming that his tax proposals have no effect on work, investor outlook, or GDP, according to the non-partisan group Tax Foundation.
The proposals to end the taxation of Social Security benefits, tips, and overtime pay would decrease payroll tax income, which is how Social Security Trust is financed. This accelerates the timeline for the depletion of the trust fund to 2031.
In particular, Trump's proposal to cut Social Security benefits from income tax would increase deficits by $1.8 trillion more than predicted under current law between 2026 and 2035. The Social Security tax cut policy alone would reduce the program's timeline by one year.
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