When competing for president, Donald Trump made a number of pledges about Social Security that resonated with American voters. He elevated the expectations of millions of pensioners by vowing not to change the structure of Social Security and to maintain the retirement age constant.
He also proposed a few recommendations that appeared to be highly popular, such as abolishing federal taxes on Social Security benefits to reduce the financial burden on individuals who rely on this income, among others.
Although these suggestions gained popularity throughout the campaign, implementing these changes to Social Security poses substantial obstacles, as some of the promises may be damaging to the program as it currently exists. Let’s break down the impact.
Will there be changes to the retirement age in the US?
The first campaign pledge Trump made was to maintain the present retirement age scale. For years, Congress has debated raising the full retirement age to compensate for Social Security’s shortfall, but it has always proven to be an unpopular move with the public, and no progress has been made in implementing it.
Trump’s idea is to keep the present retirement age, which is now set between 66 and 67 years old, depending on each beneficiary’s date of birth, rather than raising it to the proposed 70 years.
Trump has committed not to make changes that affect present or future Social Security beneficiaries, which means that pensioners will be able to obtain their full benefits at the age they have previously anticipated, without having to delay or modify their retirement plans.
Raising the retirement age would not have helped with the current Social Security shortfall; the program is expected to run out of funds by 2033, which is far too early to see any significant improvement from raising the retirement age to 70 years old; however, the measure could help to shore up the program for the future. Nonetheless, keeping this campaign pledge would be simple, and the American people would not suffer as a result.
The Importance of Federal Tax Exemption for Retirees on Social Security
Another proposal by Trump that has been enthusiastically received by pensioners in the United States is a federal tax exemption on Social Security payouts. Currently, Social Security benefits are taxed if an individual’s provisional income exceeds $25,000 or a married couple filing jointly reports income over $32,000.
In some circumstances, up to 50% of the benefits may be taxed. This means that many persons who receive benefits will see a fall in their net income as a result of tax contributions if they have other sources of income besides Social Security benefits.
Eliminating these taxes would not only relieve retirees’ financial burdens, but would also allow Social Security income to be entirely devoted to meeting basic requirements such as medical expenditures, housing, and food.
There are two difficulties with this plan. Number one, provisional income does not imply Social Security benefits. Provisional income is computed by adding the recipient’s gross income, tax-free interest, and 50% of their Social Security benefits.
This means that individuals who are taxed have funds other than Social Security benefits to assist them retire, while those who need it the most are already exempt from taxation because the tax level is already relatively high. It would only benefit the richer pensioners, who can afford basic essentials.
The other issue is that the Social Security Trust relies on these taxes to replenish itself, and because the poorest Americans will not be harmed by the taxes, they will be affected by the program’s much larger shortfall, which Trump promised to safeguard.
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