In January, close to 52 million retired-worker beneficiaries took home an average Social Security check of $1,978.77. While this is a relatively modest monthly payout, it's proved vital to helping our nation's aging workers make ends meet.
In each of the previous 23 years, Gallup has conducted a national survey of retirees that aimed to determine how important Social Security income was to their financial well-being. Every poll showed that 80% to 90% of retirees, including 88% in April 2024, required their Social Security payout, in some capacity, to cover their expenses.
Protecting and strengthening the foundation of Social Security should be a top priority for lawmakers in Washington, D.C., which includes President Donald Trump.
Unfortunately, not all proposals and campaign promises -- even those made with good intentions -- are necessarily good for the financial health of America's leading retirement program.
President Trump speaking with reporters. Image source: Official White House Photo by Andrea Hanks, courtesy of the National Archives.
Social Security is an estimated eight years away from steep benefit cuts
But before looking to the future, it's important to understand the dynamics of how Social Security got to where it is now.
For the last 85 years, Social Security's Board of Trustees has released an annual report that details how the program generates income and where every dollar in income ends up.
What's even more telling about these reports is the long-term forecast of Social Security's financial health, which accounts for the 75 years following the release of a report. When formulating these projections, the Board of Trustees accounts for changes in fiscal and monetary policy, as well as demographic shifts.
For 40 consecutive years, the Trustees have cautioned of a long-term funding obligation shortfall. In simpler terms, income collected in the 75 years following the release of a report won't be sufficient to cover outlays, which is primarily comprised of benefits, including annual cost-of-living adjustments (COLAs), and administrative expenses (to a far lesser degree). This funding shortfall ballooned to $23.2 trillion, as of the 2024 report.
Even more worrisome is the Trustees' projection that the Old-Age and Survivors Insurance Trust Fund (OASI) will exhaust its asset reserves by 2033. To be clear, this in no way means Social Security is going bankrupt or becoming insolvent. But what it does signal is that the current payout schedule, inclusive of COLAs, isn't sustainable. If the OASI's asset reserves are exhausted, retired workers and survivor beneficiaries could see their Social Security checks slashed by 21% eight years from now.
The catalyst fueling this deterioration in Social Security's financial health is ongoing demographic changes. A more than halving in legal net migration into the U.S., rising income inequality, and a historically low U.S. birth rate are some of the challenges America's leading retirement program is contending with.
The OASI's asset reserves are forecast to be depleted by 2033. US Old-Age and Survivors Insurance Trust Fund Assets at End of Year data by YCharts.
President Trump intends to fulfill his Social Security promise
Most lawmakers are well aware of Social Security's challenges and the annually released Trustees Report. However, they also understand that changing the program would make some people worse off than they were before, which is why most politicians tend to avoid the discussion altogether.
Presidential candidates don't have the luxury of avoiding this issue. While on the campaign trail, Trump promised to effectively leave Social Security alone, with one exception: the taxation of benefits.
In a July 31 post on his social media platform, Truth Social, Trump wrote, "Seniors should not pay tax on Social Security." This was a theme he repeated a week later in an interview with Fox & Friends. Now in the Oval Office, it's a campaign promise Trump intends to keep.
According to an emailed statement to CNBC from a White House official in February, the president is doubling down on his promise to end taxation on Social Security benefits.
Taxing benefits began in 1984 following the bipartisan passage of the Social Security Amendments of 1983. Starting in 1984, up to 50% of Social Security benefits could be exposed to the federal tax rate if provisional income (adjusted gross income + tax-free interest + one-half benefits) surpassed $25,000 for a single filer and $32,000 for couples filing jointly.
A separate tax tier was added in 1993 (which began in 1994) that allowed up to 85% of benefits to be subject to federal taxation if provisional income topped $34,000 for single filers and $44,000 for jointly filing couples.
What makes this one of America's most hated taxes is that neither threshold has been adjusted for inflation since going into effect in 1984 and 1994, respectively. Due to the effects of wage inflation and cost-of-living adjustments over time, a substantially larger number of senior households is now subject to this tax.
Trump's promise to eliminate this tax would increase monthly checks for around half of all aged beneficiaries, with those generating the highest Social Security benefits seeing the biggest boost.
Image source: Getty Images.
The president's Social Security promise would cripple the program
The prospect of removing a hated tax that results in beefier benefit checks is bound to receive plenty of support. The problem is that what's popular isn't always going to be what's best for Social Security, in a financial sense.
America's leading retirement program generates income three ways:
- The 12.4% payroll tax on earned income, which in 2025 is applied to wages and salary from $0.01 to $176,100
- The interest income earned on Social Security's asset reserves, which is invested in special-issue, interest-bearing government bonds, as required by law
- The taxation of Social Security benefits
In 2023, 91.3% of the $1.351 trillion in income collected came from the payroll tax, with interest income (5%) and the taxation of benefits (3.8%) rounding things out. Note: These percentages don't add to 100% due to rounding.
Eliminating the taxation of benefits would remove one of these three funding sources. Although it only accounted for 3.8% of total income in 2023, the taxation of benefits has grown into a larger percentage of annual income over time. To boot, interest income could be virtually gone if the OASI's asset reserves are depleted, as projected, by 2033.
US Old-Age, Survivors, and Disability Insurance Trust Fund Income from Taxation of Benefits Receipts data by YCharts.
Based on the Trustees' forecast, ending the taxation of Social Security benefits would remove a cumulative $943.9 billion in income from 2024 through 2033. A separate analysis from the nonpartisan Penn Wharton Budget Model (PWBM) projects an even steeper $1.452 trillion reduction in income from 2025 through 2034.
According to estimates by PWBM, removing the taxation of benefits would accelerate the depletion of Social Security's asset reserves (which includes the OASI and Disability Insurance Trust Fund) by two years, from December 2034 to December 2032.
Although ending this tax would be overwhelmingly popular with seniors, it would absolutely cripple Social Security by removing income from a program facing the possibility for sweeping benefit cuts in just eight years. It's a Social Security promise Trump would be wise to break.
