President Donald Trump was sworn into office on Jan. 20, and he has already embarked on an ambitious agenda. With the Trump administration attempting to make significant spending cuts, many retirees might be wondering what the 47th president's plans are for Social Security, which distributes benefits to tens of millions of Americans each month.
Social Security has long been in a fraught position. The program will need to reduce benefits in 10 years if Congress doesn't make changes to shore up its finances. Although it's still early, let's take a look three things President Trump has discussed that would affect Social Security.
Trump says he will not cut benefits
As recently as Feb. 18, Trump promised not to cut benefits. On Fox News, Trump told Sean Hannity that "Social Security won't be touched, other than if there's fraud or something. It's going to be strengthened. But it won't be touched." Trump also said that his administration will not be making cuts to Medicare and Medicaid.
However, Trump could find himself in a difficult position on Medicaid. Earlier this month, the House Budget Committee voted for a minimum of $880 billion in cuts to mandatory spending programs monitored by the House Energy and Commerce Committee. One of these programs is Medicaid. This is all part of a House budget resolution that Trump has supported.
Trump's reluctance to cut Social Security, Medicare, and Medicaid comes back to comments he made in 2013 when he said making cuts to these programs and winning elections "really is not going to happen." Obviously, that was a long time ago, and Trump can be unpredictable, so while he says benefit cuts are not on the table, people should closely monitor what's actually happening in Congress.
Official White House Photo by Joyce N. Boghosian.
Cutting income taxes on benefits
Not everyone is subject to income taxes on Social Security. The rule is based on combined income, which the Internal Revenue Service defines as half of a retiree's Social Security benefits plus other income from sources such as pensions, wages, dividends, and capital gains.
Single filers can see as much as half of their Social Security benefits taxed if they make between $25,000 and $34,000, and as much as 85% of benefits taxed if they make more than $34,000. For married couples filing jointly, the thresholds are $32,000 to $44,000 for half of their benefits taxed, and more than $44,000 for 85% of benefits taxed. Remember, these are not the actual tax rates, just the share of a retiree's benefits that could be taxed.
Trump said throughout the campaign trail that he wants to eliminate these taxes. Officials from the President's administration recently told CNBC that Trump plans to "double down" on this proposal. However, this promise could also prove tricky. Trump has promised to slash spending to try to rein in the growing fiscal deficit, which exceeded $1.8 trillion in fiscal year 2024.
The University of Pennsylvania Wharton School's budget model estimates that eliminating income taxes on Social Security could cut U.S. revenue by $1.5 trillion over a decade while raising the country's debt burden 7% by 2054. That's going to leave a difficult decision for Trump, given his hopes of significantly lowering the deficit.
Trump wants to lower inflation, which would impact COLAs
High inflation is not a President's friend, as many voters focus on the economy when they head to the polls. High inflation significantly hurt former President Joe Biden's approval ratings and likely had an impact on the outcome of the election. Now, inflation has slowed dramatically after rising as high as 9% in 2022. Recent data from January shows the year-over-year inflation rate was at 3%.
That is better but still above the Federal Reserve's preferred 2% target, and it's been sticky in recent months. Consumer prices remain high due to the elevated inflation in recent years, and even when inflation slows, prices are still going up. President Trump has made it clear he would like to lower prices, but the task is easier said than done, and in many cases, outside of a President's control.
Either way, if inflation drops as Trump desires, that could lead to a lower cost-of-living adjustment (COLA) for benefits. The Social Security Administration distributes a COLA each year to help the purchasing power of benefits keep pace with inflation. The annual COLA is based on inflation data from the third quarter of each year, so if prices rise at a slower pace year over year, then the next COLA will shrink too.
The 2025 COLA came in at 2.5%, but it remains to be seen how inflation will look in the remainder of this year (and the third quarter specifically). To complicate matters further, many beneficiaries and groups also believe COLAs have not kept pace with inflation long term, so even rising COLAs may not be the win some think they are.
