The Trump Economy Begins: How a Republican Congress Could Impact Those Relying on Social Security
Written by
Heather Altamirano
Edited by
Jasmine Browley
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Now that Donald Trump is back for a second presidential term, another big political shift will happen simultaneously happen post-inauguration. The Republicans now fully control Congress, which could enact new policies that can affect Social Security and some Americans’ retirement planning.
It’s no secret the program is in trouble and will run out of money by 2034, according to the Congressional Budget Office, leaving millions without their full benefits if actions aren’t taken soon.
While Trump has vowed not to cut Social Security, the new administration is expected to shake things up. The Republican Study Committee (RSC), which consists of more than 170 House GOP lawmakers, proposed a budget in early 2024 that suggested $1.5 trillion in cuts to Social Security over the next 10 years, and with a Republican-controlled Congress, new policies could be implemented.
Per experts, there are some changes seniors should be abreast of, especially for those who rely on Social Security.
Modifying the Cost-of-Living Adjustments (COLA)
The cost-of-living adjustment is an increase in pay for Social Security recipients to help offset rising prices. Right now, COLA is determined by the consumer price index for urban wage earners and clerical workers (CPI-W). However, in the past, some Republicans have called to use the chained consumer price index (C-CPI), which typically grows slower than the CPI-W.
“For people solely dependent on Social Security, this change might mean less financial stability, especially as inflation impacts everyday expenses like groceries and healthcare,” explained Danny Ray, founder of PinnacleQuote. “Above all, any reduction or slower growth in benefits could make it harder to cover basic needs.”
If this change were to happen, finance expert Andrew Lokenauth and founder of TheFinanceNewsletter.com stated it could be hard times for retirees. Seniors might have “smaller yearly increases in monthly checks, struggle to keep up with rising prices, and people living only on Social Security might need to cut back on basics.”
New Tax Policies
On the campaign trail, Trump was vocal about eliminating taxes on Social Security, which would give seniors more money in their pockets, but it would cause financial troubles in the long term and accelerate insolvency by three years, per the Committee for a Responsible Federal Government.
According to Nicole E. Asher, CFP®, CPWA®, ChFC, aenior vice president and senior wealth management advisor at Greenleaf Trust, “While Social Security recipients would benefit from this cut, it would increase the issues that the trust fund faces and create greater issues for future recipients.”
In addition to no taxes on Social Security, Ray explained that other “broader potential tax policy changes, such as Congress prioritizing tax cuts, could reduce government revenue overall” and potentially affect Social Security.
“If Congress prioritizes tax cuts that reduce government revenue, there could be pressure to reform entitlement programs like Social Security,” he said. “This might lead to reduced benefits or stricter eligibility requirements. Such changes could disproportionately affect individuals without other income sources, leaving them more vulnerable.”
Medicare Integration
This year, Medicare Part B premiums are expected to rise by 5.9%, while the Social Security COLA will only increase by 2.5%. According to Lokenauth, “This means that a portion of the COLA increase will be absorbed by the higher Medicare premiums, potentially limiting the net benefit increase for some seniors.”
He added, “Higher Medicare premiums mean lower Social Security checks. This could force tough choices between healthcare and other needs and it might push some seniors into poverty.”
Increasing the Retirement Age
In the RSC, Republicans have called to increase the retirement age from 67 to 69, stating, “modest adjustments to the retirement age for future retirees to account for increases in life expectancy. The budget also proposed lowering benefits for the highest-earning beneficiaries and emphasized the changes will not take immediate effect.
This could affect seniors because it “might force folks to work longer than planned, could reduce total lifetime benefits for many, and would hit physically demanding job workers hardest,” Lokenauth explained.
For new retirees, waiting until age 69 to leave the workforce would reduce benefits by 12.5%-14.3% and cost some recipients thousands of dollars a year, per the Center for American Progress.
Last year, nearly 68 million people received a monthly Social Security check. Asher stated, “It is difficult to speculate what level of cuts will get passed.”
She explained, “If you are currently receiving Social Security benefits, you may see a reduction in benefits. If no cuts are made, it is likely that you will not see any change for the next 10 years. After that, a reduction in benefits may occur unless the systemic issues are addressed.”
For the millions who solely count on the program, Ray noted there are a few ways to prepare for upcoming changes.
“Explore how to supplement income, such as part-time work, if possible,” he stated. “Furthermore, retirees should focus on budgeting carefully and considering assistance programs for essential services. Above all, staying informed about potential legislative changes and advocating for policies that protect Social Security benefits is critical.”
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