Anticipated Adjustments: Two Strategies Trump May Implement to Alter Social Security in 2025
In a raw, no-nonsense approach, let's dive into the brutal reality facing retirees and their Social Security benefits in 2025. While many view Social Security as a simple monthly income, it serves as the vital lifeline for the majority of retirees to survive.
For 23 years, national pollster Gallup has surveyed retirees to grasp the significant role of Social Security in their financial well-being. Between 80% and 90% of respondents each year admit their monthly Social Security check is crucial for covering expenses.
Amidst this backdrop, the pillars upholding America's vital retirement program are on unstable ground. Even though President Trump has generally stayed hands-off with Social Security, his actions in 2025 will likely lead to major changes in the world's leading social program.
Brace Yourself for Potential Benefit Cuts by 2033
Before exploring how President Trump will reshape Social Security next year, it's crucial to comprehend the roots of the problem that led to the program's perilous state. The Social Security Board of Trustees, annually since the first retirement benefit was issued in 1940, has been releasing reports detailing the source of every dollar of income and its destination. Most importantly, these reports provide forecasts about Social Security's financial health. Since 1984, the Trustees have consistently predicted a funding obligation shortfall lasting 75 years, which grew to $23.2 trillion in 2024.
More alarmingly, it's expected that the Old-Age and Survivors Insurance Trust Fund's (OASI's) asset reserves will be depleted by 2033. Although Social Security can't go bankrupt or become insolvent since it generates over 91% of its income from the 12.4% payroll tax on earned income, the current payout schedule—including cost-of-living adjustments (COLAs)—doesn't seem sustainable.
If the OASI's asset reserves run dry in eight years, retired workers and survivor beneficiaries can expect their monthly checks to be slashed by 21%. Though various theories on social media blame lawmakers for pilfering funds or undocumented migrants, realistic factors include rising income inequality, a historically low U.S. birth rate, and a significant reduction in net legal migration into the country.
How President Trump is Set to Change Social Security
Although Trump emphatically explained he wouldn't interfere with Social Security, his true intentions are not as straightforward. Based on his actions over the previous six weeks and four budget proposals during his first term, efficiency-based cost reductions are imminent. During an interview with Meet the Press, the president concisely stated, “I said to people we're not touching Social Security, other than we make it more efficient. But the people are going to get what they're getting.”
Trump targeted Social Security for efficiency-based cost reductions in each of his budget proposals during his first term. The estimated savings from these proposals amounted to:
- $72 billion from fiscal year (FY) 2018 through FY 2027.
- $64 billion from FY 2019 through FY 2028.
- $26 billion from FY 2020 through FY 2029.
- $24 billion from FY 2021 through FY 2030.
Some examples of how cost reductions would be attained involve reducing retroactive benefits for disabled workers to six months from the current 12 months. Since President Trump took office in January 2025, he has signed an executive order that directs government agencies to cut costs by shedding employees, such as reducing the Social Security Administration (SSA) workforce from 57,000 to 50,000, and closing some locations.
However, it's essential to acknowledge that the SSA's administrative expenses only amounted to $7.2 billion of the program's $1.392 trillion in outlays in 2023. Reducing the SSA's workforce and office leases will have minimal impact on the program's $23.2 trillion long-term funding shortfall or the OASI's expected asset reserve depletion eight years from now.
Trump's Tariff Policy Influencing Social Security's 2026 COLA
The other significant way President Trump will alter Social Security is through the impact of his tariff policy on the program's 2026 cost-of-living adjustment (COLA). Trump aims to safeguard American jobs by imposing tariffs on certain goods imported from Canada, Mexico, and China. Unfortunately, the unpredictable nature of these tariffs and their lack of differentiation between output and input tariffs could fuel inflation.
Going back to basics, a tariff is a tax added to an imported or exported good. tariffs are intended to protect American jobs and promote domestic manufacturing. If goods from outside the country become more expensive, consumers will supposedly opt for domestic products instead.
However, this perfect scenario doesn't always materialize. Output tariffs often result in retaliatory tariffs, but input tariffs increase the costs for consumers, potentially boosting inflation. Social Security's COLA is adjusted based on inflation to maintain the purchasing power of benefits. Although Donald Trump's tariffs could raise the 2026 COLA, retirees' buying power could still decline unless the inflationary pressures of the tariffs exceed the rising costs of shelter and healthcare—two essential expenses for seniors.
In the event that Social Security's 2026 COLA increases, don't celebrate just yet. The likelihood of retirees suffering reduced buying power persists unless inflation caused by President Trump's tariffs pushes the COLA above the trailing-12-month inflation rate for housing and healthcare services, two expenses seniors disproportionately allocate a higher percentage of their budgets towards.
[1] Social Security Administration. (n.d.). When will I get my benefits? Retrieved from https://www.ssa.gov/benefits/retirement/planner/alerts.htm
[2] Social Security Administation. (n.d.). Windfall Elimination Provision (WEP). Retrieved from https://www.ssa.gov/pubs/EN-05-10087.pdf
[3] Social Security Administation. (n.d.). Government Pension Offset (GPO). Retrieved from https://www.ssa.gov/pubs/EN-05-10054.pdf
- The estimated savings from President Trump's proposed efficiency-based cost reductions for Social Security between 2021 and 2030 total up to $72 billion, an amount that will likely influence the future financial outlook of retirees.
- In an attempt to safeguard American jobs, President Trump has imposed tariffs on certain goods imported from Canada, Mexico, and China. These tariffs could potentially lead to inflation, impacting Social Security recipients' cost-of-living adjustment (COLA) in 2026.
- To maintain the purchasing power of their benefits, retirees should pay close attention to the inflationary pressures caused by President Trump's tariffs, as they could either boost or deplete their buying power, depending on whether the COLA adjustment surpasses the rising costs of essential expenses like housing and healthcare.
- It is essential for retirees to carefully outline their financial plans, especially in relation to Social Security benefits, considering the potential changes in benefit amounts and COLAs due to President Trump's actions in 2025 and beyond, to ensure they can continue to meet their living expenses during retirement.