Just one comment makes it sound like Trump wants to change an important part of Social Security, but doing so could be very bad. Over 52 million retired workers got an average check of $1,925.46 in November.
While this may not seem like much money, it has become very important for elderly workers in our country to have this source of income.
Gallup has been polling people across the country for 23 years and has been asking retirees how dependent they are on their Social Security payments. Since 2002, 80% to 90% of respondents have said that Social Security is either a “major” or “minor” source of income. In April 2024, 88% of respondents said this.
This means that almost 90% of seniors would have a hard time surviving without Social Security. But, even though Social Security has helped tens of millions of retirees build stronger financial foundations, this important program is having a hard time.
People who are currently receiving the program and people who will receive it in the future, including incoming President Donald Trump, are counting on their elected officials to make it stronger.
Donald Trump’s proposal that will change everything in Social Security
The Social Security Board of Trustees has put out an annual report on the program’s finances every year since January 1940, when the first benefit check was sent to a retired worker.
The Trustees Report, which comes out every year, shows how money is collected and spent. It also predicts that Social Security will have enough money to pay its bills for 75 years. Since 1985, every Trustees Report has predicted a long-term funding commitment gap.
In other words, the Trustees do not believe that the total amount of money coming in will be enough to cover costs, like cost-of-living adjustments (COLAs) every year for 75 years after a report.
The 2024 Trustees Report said that Social Security’s 75-year funding deficit would be $23.2 trillion, which is $800 billion more than what was said in the 2023 report. It is even scarier to think that pensioners might soon have their benefits cut for everyone.
The Old-Age and Survivors Insurance Trust Fund (OASI) is supposed to pay retired workers and the families of deceased workers every month, but the 2024 Trustees Report says that it will run out of money by 2033.
It is important to make it clear that the fact that the OASI’s asset reserves are running low does not mean that Social Security is broke or going out of business. However, it does mean that the current payout schedule, which includes COLAs, can not go on forever.
Massive cuts to benefits of up to 21% might be needed to stop any more cuts until 2098 if the OASI’s asset reserves run out by 2033 as expected.
Two examples of ongoing demographic changes that are causing Social Security’s financial base to collapse are a historically low birth rate in the U.S. and a growing income gap. These are not examples of “congressional theft” or “undocumented migrants.”
Seniors should not pay taxes on their monthly benefits
During his first term, President-elect Donald Trump did not talk about Social Security. However, presidential candidates usually take stands on important issues while they are campaigning.
In July, Trump made a post on Truth Social that could be seen as a promise to change Social Security for good: he said that seniors should not have to pay taxes on their benefits. In fact, this is neither a bill nor even a drawing of a bill. It does, however, show support for the new president’s plan to get rid of the Social Security benefit tax.
In 1983, Social Security was in the same kind of shape that the Trustees think it will be in nine years. The Social Security Amendments of 1983 were voted on by Congress and then signed into law by President Ronald Reagan.
This was done because it was expected that the program’s asset reserves would run out. This bipartisan change to America’s best retirement program raised both the full retirement age and payroll taxes on workers over time. In addition, it led to the taxation of benefits.
Since 1984, up to half of your monthly payments may be taxed by the federal government if your provisional income is more than $25,000 for single filers or $32,000 for couples filing jointly. In 1993, the Clinton administration added a second level of taxes.
This meant that up to 85% of benefits could be taxed by the federal government if they were worth more than $34,000 for a single taxpayer or $44,000 for a married couple filing jointly.
When the benefits taxation was first put in place, it was thought that about 10% of all senior households would be affected. However, the number of pensioners who have to pay this tax has slowly gone up over time as COLAs have gone up. This is because the income requirements have never been changed to account for inflation.
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