Donald Trump’s Social Security plan: key policies ahead of the US election

1 min read by Unbiased team Last updated October 4, 2024

Unpack the implications of Donald Trump’s proposed changes to Social Security, including tax exemptions and fraud prevention measures.

Summary 

  • Trump proposes exempting Social Security benefits from federal income taxes, which would increase disposable income for retirees. 

  • Exempting benefits from taxes is estimated to add around $1.6 trillion to the federal deficit over the next decade. 

  • His proposal includes combating fraud within the Social Security system with increased oversight and enforcement. 

  • A financial advisor can help you plan for your financial future and ensure your money is secure. You can match with an advisor through Unbiased here.  

What are Donald Trump’s Social Security proposals? 

If elected, former President Donald Trump and the Republican Party have committed to not cutting Social Security. They have also stated they will not change the retirement age and will not introduce cuts to Medicare.  

Donald Trump has proposed two significant changes to Social Security. One is to exempt Social Security benefits from federal income taxes.  

Currently, recipients with lower incomes pay no tax on their benefits, but higher earners can see up to 85% of their benefits taxed. Trump's proposal would eliminate these taxes entirely, providing more disposable income for retirees.  

Additionally, Trump’s plan for Social Security includes combatting fraud and waste within the system. He has suggested increased oversight and better enforcement of rules to curb misuse of funds and ensure that benefits are directed only to those entitled to them.  

What is the potential impact of his Social Security plan? 

Exempting Social Security benefits from federal income tax would offer short-term relief for many retirees, particularly those with moderate to high incomes.  

However, this comes with significant long-term consequences.  

According to estimates, the exemption would result in Social Security and Medicare receiving around $1.6 trillion less revenue between 2026 and 2035. . This would accelerate the insolvency of the Social Security Trust Fund, potentially bringing its depletion date closer.  

Though some argue that Trump’s Social Security proposal would incentivize more retirees to work and invest, boosting the economy slightly, the overall economic impact would likely be minimal.  

The revenue lost from exempting benefits would far outweigh the gains in economic productivity, and the insolvency risks would cast a shadow over the program's future stability. 

How does Donald Trump’s proposal compare to Kamala Harris’ plans? 

While Donald Trump's Social Security proposals focus on cutting taxes to benefit retirees, Kamala Harris takes a different approach.  

Harris’ platform emphasizes strengthening Social Security by increasing revenue through higher taxes on the wealthy. She supports expanding the payroll tax to incomes over $250,000, compared to the current cap of $168,600 in 2024. 

Harris co-sponsored the Social Security Expansion Act with Bernie Sanders, advocating for policies that would ensure the program's solvency by making the wealthiest Americans contribute more.  

Her focus is on maintaining and potentially increasing benefits, whereas Trump’s plan risks diminishing the future viability of the program due to decreased funding. 

What are the pros and cons of Donald Trump’s Social Security plan? 

The Donald Trump Social Security plan presents a mix of advantages and disadvantages that impact both retirees and the broader economy. 

Pros of Donald Trump’s Social Security plan: 

  • More disposable income for retirees: By eliminating federal income taxes on Social Security benefits, retirees would have more money to cover living expenses, especially in times of inflation. 

  • Immediate financial relief: Retirees could experience a boost in their after-tax income, providing short-term financial stability. 

  • Work and investment incentives: Lower tax burdens on retirees could encourage some to continue working or invest, contributing to the economy. 

  • Fraud prevention: Efforts to curb fraud and waste could ensure Social Security funds are more effectively allocated. 

Cons of Donald Trump’s Social Security plan: 

  • Accelerated insolvency of Social Security: Eliminating taxes on Social Security benefits would remove a vital source of revenue, speeding up the depletion of the trust funds. 

  • Increased federal deficit: The proposal could add approximately $1.6 trillion to the deficit over a decade, burdening future generations. 

  • Unfair distribution of benefits: The proposal primarily benefits wealthier retirees, while low-income recipients, already exempt from taxes, gain little. 

  • Lack of long-term security: The potential insolvency of Social Security could lead to future benefit reductions, undermining the program's purpose. 

How might Donald Trump’s Social Security proposal affect you? 

For retirees, Trump’s plan for Social Security and eliminating federal income tax benefits would mean more money in the short term. However, the broader implications need careful consideration.  

The plan does not provide a solution to Social Security's long-term challenges.  

If the trust funds deplete faster, it could result in benefit reductions or the need for alternative funding measures, such as raising payroll taxes or cutting spending in other areas. 

For younger workers, these changes may also affect retirement planning.  

The risk of reduced benefits due to insolvency could mean the need for increased personal savings or reliance on private retirement accounts.  

Therefore, while the proposal may provide immediate relief for current retirees, it introduces uncertainty for future generations. 

Find the right financial advisor 

While Donald Trump’s plan for Social Security exemption from federal income taxes offers immediate financial relief and aims to address fraud, it also raises significant concerns, including accelerated trust fund depletion and increased federal deficit. There are also questions like "does Trump want to cut Social Security?" and the potential impact of Trump cutting Social Security could affect the program’s long-term stability.  

As the debate continues, it is essential to carefully weigh these factors to understand the full implications for both current retirees and the future of Social Security. 

Unbiased will match you with a financial advisor for expert financial advice to help you navigate the complexities of Social Security planning and ensure your retirement strategy aligns with your long-term goals. 

Writers

Unbiased team

Our team of writers, who have decades of experience writing about personal finance, including investing and retirement, are here to help you find out what you must know about life’s biggest financial decisions.