For most retirees, Social Security is more than just a monthly payment; it is the foundation of their retirement income and a critical factor in budgeting.
Since 2002, Gallup has polled retirees to determine the significance of Social Security in their financial lives.
Every year, between 80% and 90% of retirees say they rely on their Social Security benefits to cover their expenses.
This makes protecting and strengthening Social Security a top priority for legislators, including President Donald Trump. However, the program faces significant challenges.
Although Trump has mostly refrained from making major changes to Social Security, his recent actions indicate that two significant changes could occur in 2025.
Social Security Could Face Major Cuts by 2033
To understand the potential changes to Social Security, we must first understand how the program became insolvent.
Since the first Social Security check was issued in January 1940, the Social Security Board of Trustees has published an annual report on the program’s revenue and expenses.
These reports also include long-term projections based on economic policy and population trends.
For the past four decades, these reports have predicted a long-term funding shortfall. By 2024, the shortfall would have grown to $23.2 trillion.
The main concern is that the Old Age and Survivors Insurance Trust Fund (OASI) may be completely depleted by 2033.
Social Security is not in danger of bankruptcy because more than 91% of its funding comes from a 12.4% payroll tax on earned income.
However, if the trust fund runs out, retirees and survivors’ monthly benefits may be reduced by 21%.
The funding issues are primarily due to changing demographics. Myths about congressional theft and undocumented immigrants abound, but the true causes are rising income inequality, low birth rates, and a decline in legal immigration.
Trump’s Expected Social Security Changes in 2025
During his campaign and after winning the 2024 election, Trump promised not to cut Social Security benefits. However, his actions suggest that two major changes are likely in 2025.
1. Efficiency-Based Cost Reductions
While Trump isn’t planning to reduce Social Security benefits directly, he has indicated that efficiency-based cost cuts are coming.
In a December interview on Meet the Press, Trump stated, “We’re not touching Social Security, other than making it more efficient. But the people are going to get what they’re getting.”
Trump’s budget proposals during his first term included plans to reduce Social Security costs through efficiency improvements:
- $72 billion in savings from 2018 to 2027
- $64 billion in savings from 2019 to 2028
- $26 billion in savings from 2020 to 2029
- $24 billion in savings from 2021 to 2030
One notable proposal involved cutting retroactive benefits for workers with disabilities from 12 months to six months.
Since returning to office, Trump has signed an executive order requiring federal agencies to cut costs and reduce staff.
The Social Security Administration (SSA) is expected to eliminate 7,000 jobs, reduce its workforce to 50,000, and close some office locations.
However, administrative costs make up only a small part of Social Security’s expenses — about $7.2 billion out of the $1.392 trillion spent in 2023.
This means that cutting staff and closing offices won’t significantly reduce the $23.2 trillion funding gap or prevent the trust fund from running out in 2033.
2. Tariff Policy Could Impact the 2026 COLA
Trump’s second major change to Social Security involves the program’s cost-of-living adjustment (COLA), which is an annual increase designed to keep benefits in line with inflation.
Trump’s proposal to impose tariffs on certain goods imported from Canada, Mexico, and China may raise inflation in 2025, affecting the 2026 COLA.
Tariffs are taxes levied on imported or exported goods that are intended to protect American jobs while encouraging domestic production. However, they can also raise consumer prices.
There are two types of tariffs:
- Output tariffs – Taxes on finished products, which may give U.S. manufacturers a competitive edge.
- Input tariffs – Taxes on imported materials used to produce finished goods. These can increase production costs and lead to higher prices for consumers.
For example, most U.S. auto manufacturers import parts to build cars. If those parts face tariffs, production costs and car prices will rise, contributing to inflation.
Social Security’s COLA is based on inflation. If inflation rises because of Trump’s tariffs, the 2026 COLA would increase accordingly.
However, even if the 2026 COLA rises, it might not keep pace with the actual costs seniors face. Retirees tend to spend more on housing and healthcare, which have been increasing faster than the overall inflation rate.
Unless the 2026 COLA exceeds the inflation rate for housing and healthcare, seniors may still experience a decline in purchasing power.
What It Means for Retirees?
While Trump’s proposed changes may increase efficiency and COLA adjustments, they are unlikely to address Social Security’s long-term funding issues.
Retirees may receive higher benefits due to inflation adjustments, but rising housing and healthcare costs may offset these gains.
Protecting Social Security’s future will most likely necessitate more significant reforms, and it remains to be seen whether Trump and Congress will act before the trust fund runs out in 2033.