There will always be some level of uncertainty when the structure of the government changes. This is especially true when it comes to Social Security. Even though the person you voted for may be the next president of our country, there is still a lot of uncertainty about how the campaign promises will be kept and whether the results will bring America back to greatness.
You don’t have to say how much you agree with the next president’s plans or the people he plans to put together to carry them out. What matters is how each policy will impact other parts of American life, like the Social Security Administration (SSA), once it is put into place.
Since its start in 1939, Social Security has had a clear goal for all Americans: to give them a safety net to keep them from falling into poverty. The main goal of this federal agency is to go after a few possible causes of poverty by creating programs that will reach the groups of people most likely to be affected by those causes and give them a Social Security check to ease their worries.
Why may Social Security change in the following years?
The next US president, Donald Trump, has made it clear what he wants to do about taxes. He wants to get the American economy going again by lowering taxes and raising tariffs. This will encourage people to buy classic items that say “made in America.” You might be curious about how this will affect the money you get when you retire.
The kind of effect you will feel will also depend on how you currently interact with the SSA. One of Trump’s main ideas for helping retirees is to lower the taxes that people pay on their Social Security benefits. If you are still working, you might not know about this problem, but if you are retired, you have probably already run into it.
There will be people who think we’re talking about the Social Security taxes. They are the parts of your earnings that you (and, if you work for someone else), send to the Social Security Administration (SSA).
These payments help you build up Social Security Credits over time, and after getting 40 credits, you become eligible for benefits.
But we’re talking about the amount of money retired people pay each month when they get their benefits. This basically refers to the amount of their income tax that will be taken out of their Social Security checks.
Because the government can still tax your income even after you retire. The method finds your adjusted gross income (AGI), which is your gross income for the year minus certain deductions. AGI includes things like wages, tips, rent, capital gains, dividends, and alimony.
But once you retire, you have to put 50% of your Social Security payments into that account to figure out how much of your benefits will be taxed. This is how your benefit brackets will work:
- Your benefits below $25,000 are not taxed.
- Up to 50% of your benefits between $25,000 and $34,000 are taxable.
- If you earn more than $34,000, up to 85% of your benefits may be considered taxable.
If you consider Trump’s proposal to reduce those taxes, current retirees will profit considerably because their monthly payments will rise over time. Unfortunately, as previously stated, policy changes have several systemic implications rather than a single direct influence.
In this case, Social Security uses those taxes to provide an additional income stream to fund the retirement insurance system; without it, the Committee for a Responsible Federal Budget estimates that the SSA will run out of funds in six years rather than nine, resulting in a 10% increase in expenses and the need for more federal budget.
This, combined with increasing inflation due to tariff implementation, would imply a drop in retirement benefits based solely on decreased purchasing power.
