Seniors would face heftier cuts to their Social Security benefits sooner than expected if Donald Trump wins the presidential election and his campaign promises are implemented, a new analysis found.
The reserve fund for Social Security would run empty by 2031 instead of the current estimate of 2034 if Trump's tax breaks, tariffs, and mass deportations are imposed, according to a new report from the Committee for a Responsible Federal Budget (CRFB).
At that time, Social Security benefits would be cut by 30% to 31%, reaching 33% by 2035. If Social Security remains on the current trajectory, the reduction would be 23% by 2035.
"Social Security is nine years from insolvency, and neither campaign has a plan to solve it," said Marc Goldwein, a senior policy director for CRFB, a nonpartisan public policy organization. "But President Trump's plans would make it much, much worse."
Though not considered in this report, Goldwein also added that the policies would hurt Medicare's funding as well. Payroll taxes, specifically FICA taxes, fund both Social Security and Medicare.
While there are real questions if all these policies would be enacted should Trump win a second term, simply adding to existing concerns over Social Security's solvency could be enough to drive people to make poorer financial decisions.
"It’s beyond irresponsible, toying with people’s retirement," Laurence Kotlikoff, a professor of economics at Boston University and an expert on Social Security. "We already have too many people taking benefits too early, forfeiting hundreds of thousands of dollars in benefits."
(Credit: Committee for a Responsible Federal Budget)
'They're paying into the Social Security program'
The report considered Trump's promises to get rid of taxes on Social Security benefits, tips, and overtime as well as his vow to deport undocumented immigrants and impose a 10% to 20% tariff on imported goods and a 60% tariff on Chinese goods.
By not taxing Social Security benefits — which directly go to Social Security and Medicare Trust Funds — Social Security would lose $950 billion, the analysis found.
Another $900 billion would be lost to the elimination of taxes on overtime and tips, the former of which is subject to FICA taxes and the latter must be reported at tax time.
The tariffs and deportations would reduce the money going to Social Security by $400 billion. In total, that's $2.25 trillion less than would be collected under current law.
Goldwein noted that tariffs increase Social Security spending because tariffs increase prices, boosting inflation. Benefits are indexed to inflation, so they would also increase with consumer prices. The Social Security Administration would then have to pay out more in benefits.
Undocumented immigrants also add to Social Security's coffers, Goldwein said.
"The vast majority of undocumented immigrants are of working age. Many of them work in jobs where they pay taxes either because they gain some legal status after they've gotten here, or they write down a random Social Security number," he said.
"Either way, they're paying into the Social Security program."
In fact, the Congressional Budget Office estimated that the recent surge in immigrants is expected to bring in $348 billion in Social Security taxes over the 2024–2034 period. The CRFB report assumes this would be reduced to $100 billion to $150 billion under Trump's immigration policies.
Republican presidential nominee Donald Trump delivers remarks on the damage and federal response to Hurricane Helene on Oct. 21 in Swannanoa, N.C. (AP Photo/Evan Vucci) ·ASSOCIATED PRESS
Another domino?
While the report only focuses on Social Security, Medicare would also be threatened, said Goldwein, who noted that he might do an additional analysis on that.
Right now, the reserves that Medicare uses for hospital coverage — known as Medicare Part A — are expected to run out in 2036. Eliminating just the taxes on Social Security benefits would move up that date to 2030.
Add in the other tax breaks, tariffs, and deportations, and "those extra should make it even more severe," Goldwein said. "Medicare would likely be insolvent before 2030 under these proposals."
The Medicare trustees have previously said the fund's insolvency could first cause delays in payments to health plans and hospitals. Additionally, seniors' "access to healthcare services could rapidly be curtailed."
The real-life consequences
The severity of Social Security cuts would differ by income. The report found that about half of beneficiaries would see the full 33% cut — typically those with lower incomes who don't pay taxes on benefits now. In 2024, an individual with income below $25,000 does not have to pay taxes on their benefits. That amount is $32,000 for a married couple filing jointly.
Seniors with just enough income to pay taxes would see a 30% cut to their benefits, while those with $100,000 in annual income in retirement would experience a 26% reduction. The very highest income retirees would only see a 3% nick off their benefits.
The cuts are regressive partly because the tax on Social Security benefits is progressive, meaning people are taxed more if they have higher incomes. Those with the top incomes would see a tax break that would largely offset the cut in their benefits.
"Those who are impacted, the majority of them are in the middle class," said Emmanuel Eliason, a certified financial planner in Centennial, Colo. "So less money in the pocket means that their lifestyle may have to be adjusted."
The reserve fund for Social Security would run empty by 2031 instead of the current estimate of 2034 if Donald Trump's tax breaks, tariffs, and mass deportations are imposed, new report shows. (AP Foto/Jenny Kane, Archivo) ·ASSOCIATED PRESS
For those who rely on Social Security for the majority of their income, a cut like this could be devastating, said Monica Dwyer, senior vice president at Harvest Financial Advisors in West Chester, Ohio.
"It will increase the need for government aid such as affordable housing, Medicaid, and other social services, and it will likely mean more homelessness than we have ever seen," she said.
Just the threat of steeper Social Security reductions could hurt people's financial planning.
But if they wait until 70, their benefits would be larger — 8% more every year past full retirement age. Many experts encourage people to wait as long as possible to claim to get the bigger benefit.
"Sometimes the fear about whether Social Security is going to be available encourages people to make bad Social Security decisions," Dwyer said. "I am very concerned that [the effect of Trump's proposals] will make people’s irrational thinking worse."
Janna Herron is a Senior Columnist at Yahoo Finance. Follow her on X @JannaHerron.
