Even if you do a good job of saving money and investing for your senior years, you may need your Social Security benefits to meet your retirement goals. That’s why the program’s current funding crisis is a big problem.
The Social Security Trustees recently reported that the program’s Old-Age and Survivors Insurance (OASI) Trust Fund is expected to run out of money by 2032. Once that happens, Social Security recipients could be looking at a 22% reduction in their monthly benefits unless Congress manages to step in. But is President Trump to blame for this gigantic mess?
While Trump did not make cuts to Social Security directly, his new tax policies may have worsened the program’s finances.
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Social Security’s funding problem started long before President Trump
The main reason Social Security is facing broad benefit cuts boils down to a shrinking labor force. Social Security gets the majority of its revenue from payroll taxes. But in the coming years, the program is expected to owe more money in scheduled benefits than it collects in payroll taxes as older workers retire in droves.
Social Security will not have to stop paying benefits once its OASI Trust Fund is out of money, because it will still have incoming revenue from payroll taxes. But that revenue won’t be enough to cover benefits in full.
None of this can reasonably be blamed on President Trump. Social Security’s funding issues existed before Trump took office. And the program’s Trustees have been sounding warnings for years about the impending financial crisis.
Trump also cannot be blamed for the fact that the population is aging and birth rates have slowed down, creating a situation where there aren’t enough replacement workers to make up for those who are retiring.
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Trump’s tax policies made things worse for Social Security
While Trump did not cause Social Security’s funding crunch, his One Big Beautiful Bill Act (OBBBA) introduced a number of tax changes that took critical revenue away from Social Security.
One big change contained in the OBBBA is the $6,000 senior tax deduction. Due to that deduction, an estimated 88% of Social Security recipients currently do not have to pay taxes on their monthly benefits.
But taxes on benefits help fund Social Security on top of payroll taxes. So the loss of that revenue has worsened the program’s financial situation.
Social Security’s Office of the Chief Actuary reported last year that Trump’s OBBBA is expected to cost the program $168.6 billion between 2025 and 2034. The OBBBA also accelerated the timeline for the OASI Trust Fund’s depletion.
Prior to the OBBBA, the OASI Trust Fund was expected to run dry in the first quarter of 2033. Now, it’s expected to run out of money during the fourth quarter of 2032.
Social Security cuts could still be avoided
Although Social Security is in a pretty dire situation right now, it’s important to recognize that benefit cuts are not guaranteed to happen. Social Security has faced financial challenges before, and lawmakers have never allowed the program to cut benefits.
The Senior Citizens League, a nonpartisan advocacy group, says that 44% of retirement-age Americans today rely on Social Security for 100% of their income. Broad benefit cuts could therefore be catastrophic, and that’s something lawmakers are well aware of. So it’s fair to assume that they’ll try their best to prevent cuts like they’ve done in the past.
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How to prepare in case benefits are reduced
Even though lawmakers may be able to prevent Social Security cuts, it’s important to prepare for them. If you’re still working, the best thing to do is immediately increase your IRA or 401(k) contribution rate, even if it’s by only a small amount.
In fact, if you aim to raise your savings rate by 1% a year, you could end up with a lot of savings, which means that if Social Security cuts benefits, it may not hit you as hard. It’s also smart to invest your savings in assets that can generate strong returns, like stocks.
If you’re already retired, your best bet is to try to conserve costs so you can bank a little savings. You may also want to start exploring options for part-time work in case you need to supplement your monthly Social Security checks in the future.
Bottom line
Social Security plays a big role in many seniors’ retirement plans. So the fact that benefit cuts are on the table is no doubt scary.
While President Trump certainly did not cause Social Security’s ongoing funding crisis, his OBBBA tax policies are putting an additional strain on the program. And his bill may have pushed the OASI Trust Fund closer to depletion.
That doesn’t mean lawmakers won’t rally and find a way to prevent benefit cuts. But it does mean that workers and retirees alike need to keep tabs on Social Security news and prepare for the possibility of reduced benefits just in case.
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