Social Security Is Changing Under President Trump. Here's What Retirees Need to Know.

President Trump has frequently promised not to cut Social Security benefits. "I'm not going to touch Social Security, Medicare, Medicaid," he told Fox News earlier this year. President Trump has also promised to shore up the retirement program by eliminating fraud, waste, and abuse, and he has taken action on that promise during his first 100 days in office.

Image source: Trump-Official White House Photo by Shealah Craighead.

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How Social Security has already changed under President Trump

The Social Security Administration (SSA), with help from the Department of Government Efficiency, has recently made a number of changes to reduce wasteful spending, prevent fraud, and improve customer service. "I am proud of the extraordinary work by our dedicated employees at SSA to help deliver on President Trump's promise to protect Social Security," said Acting Commissioner Lee Dudek.

• Cost reductions: The SSA has identified more than $1 billion in costs savings through "common-sense approaches in areas such as payroll, information technology, contracts and grants printing, travel, and purchase card policies." That represents about 14% of administrative expenses in the previous fiscal year.
• Workforce reductions: In February, the SSA cut its staffing target to 50,000 workers, down from 57,000. The agency has made progress on reaching that goal, processing 350 deferred resignations and other 3,000 voluntary separations to date. Workforce reductions will eventually lead to more cost savings.
• Overpayment recovery: In March, the SSA raised its default overpayment withholding rate to 100%. It had been reduced to 10% last year under the Biden administration. The means Social Security recipients that are accidentally overpaid will have all future benefits withheld until the balance is zero. The agency estimates the annual cost savings will total $700 million.
• Fraud prevention: In April, the SSA introduced new fraud prevention technology that allows beneficiaries to complete claims by telephone. The agency previously planned to require identity proofing online or in-person, but the new fraud prevention measures mean that is only necessary when irregularities are detected on the phone.

Importantly, while the changes listed above will reduce costs, the impact will be relatively small given the scope of Social Security's financing problems. The program is expected to run a $110 billion deficit in fiscal 2025.

Put differently, the Social Security Trust Fund is still on pace to be exhausted in about 10 years. In addition, other changes proposed by President Trump may actually worsen the program's finances and accelerate the time to trust fund depletion.

How Social Security might continue to change under President Trump

Social Security is primarily funded by taxes: Payroll taxes account for 91% of revenue, and taxes collected on benefits account for 4%. So any changes to tax law could indirectly hurt the retirement program by reducing cash inflows. And President Trump has proposed exempting tips, overtime, and benefits from federal income tax.

Importantly, the Social Security Trust Fund is already on pace to be depleted in 2034, at which point the third funding source, interest on Trust Fund assets, would disappear. The Congressional Budget Office estimates the remaining tax revenues would cover only 77% of scheduled benefits in 2035, meaning benefits would be cut 23% unless lawmakers find a solution.

The Committee for a Responsible Federal Budget estimates that ending taxes on tips, overtime, and benefits would reduce Social Security's revenue by nearly $1.9 trillion during the next decade. That vastly exceeds any savings the program will realize from the changes outlined in the previous section. Moreover, it could accelerate the timeline to Trust Fund depletion by three years.

So what? Ending taxes on tips, overtime, and benefits would make it more challenging for Congress to find a fix for Social Security's funding problem. In fact, those changes could increase by 80% the deficit the program is projected to run during the next decade.

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