Social Security Cuts: 3 Ways Your Wallet Could Be Impacted Over the Next Five Years
Written by
Jake Safane
Edited by
Chris Cluff
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Seemingly every federal election cycle, Social Security and related benefits like Medicare seem to come into the spotlight. One candidate might propose program cuts to improve their solvency, while another suggests changes like how tax revenue supports these programs.
Social Security is once again under discussion this election cycle, with former President Donald Trump telling CNBC that “there is a lot you can do in terms of entitlements, in terms of cutting.” His campaign later said he was referring to “cutting waste and fraud.”
Meanwhile, President Biden has campaigned against cutting Social Security benefits. However, based on a Congressional Budget Office analysis, if no action is taken to bolster Social Security benefits, they could be cut by over 20% as the trust fund dries up.
“This issue has drawn a clear contrast between Democrats and Republicans in possibly the most politically charged election year in American history,” said Chris Orestis, president of Retirement Genius.
Politics aside, though, Orestis thinks “changes will need to be made to reflect the longer life expectancies of today, a growing population of people on these programs, and a shrinking workforce.”
In the coming years, he sees three potential ways that Social Security benefits could change.
Raising Rates
One adjustable lever to bring more revenue into the Social Security program would be raising taxes. President Biden’s latest budget said his administration is open to working with Congress to increase Social Security solvency “by asking the highest-income Americans to pay their fair share.”
For 2024, any income above $168,600 does not incur Social Security taxes. In years past, Democrats have suggested raising this cap to bring in more revenue.
Increasing Qualifying Retirement Ages
While neither former President Trump nor President Biden has suggested raising the retirement age to start claiming Social Security benefits, it’s been done in the past and could be used again to increase Social Security solvency. However, current Republican Congress members have proposed this approach as recently as March 2024.
“The House Republican Study Committee caucus, representing almost “80% of the Republican members of the House of Representatives, released a 2025 budget proposal named Fiscal Sanity to Save America. They were much more specific in calling for an increase in the retirement age to qualify for Social Security and a decrease in benefit levels for high-income earners,” said Orestis.
Reducing and Eliminating Benefits for the Wealthy
Lastly, Social Security benefits could be changed in a way that reduces or eliminates benefits for high-income or high-net-worth individuals, said Orestis.
According to a University of Maryland survey, reducing benefits for high-income earners has broad support amongst voters, both Republicans and Democrats. However, like with increasing the retirement age, this change wouldn’t be immediate.
“It is unlikely at this time there would be a reduction in benefits or an increase in the retirement age from current levels,” Orestis said. “The more likely approach would be to issue a reduced benefit and/or increased retirement age schedule targeted at a point in the future that would impact people not yet on the program.
“You really can’t take benefits away from people or change qualifying age formulas for those already on the program, but it is more manageable to reduce benefit levels in the future and/or increase ages for people who are yet to go on Social Security.”
What Happens Next?
While some Social Security changes could be enacted in the next five years, the specifics depend on who wins the presidential and Congressional elections. The state of the economy also matters, particularly in terms of how much payroll tax comes in to support Social Security, said Orestis.
“But the economic/demographic realities dictate that it is just a matter of when and not if changes to entitlements are made to shore up their solvency,” Orestis said. “As is the case with balancing any budget, it will take a combination of increasing revenue (taxes) and decreasing spending (benefits and age-based parameters) to ensure these programs remain solvent for decades to come.”
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