Social Security income is very important for retired Americans. About 54 million retired workers get a monthly Social Security check. For almost 25 years, Gallup surveys have shown that up to 90% of retirees need Social Security money to pay for daily expenses. Even though Social Security is so important, lawmakers have not focused enough on making it stronger for the future. Reports from the Social Security Board of Trustees show that the program’s finances are getting weaker every year.
If nothing changes, big benefit cuts could happen within the next seven years. Many factors are hurting Social Security, but new tax breaks under former President Donald Trump may be one reason. Social Security has a long-term funding gap of $25.1 trillion over the next 75 years, as stated by The Motley Fool. This means future money coming in will not be enough to pay all benefits and costs. The $25.1 trillion shortfall has been growing steadily for the past four decades.
This means Social Security will not go bankrupt or disappear. However, if reserves are gone, full benefits cannot be paid anymore. Retirees and survivors could see benefit cuts of up to 23% if reserves run out in 2033. A major reason for this problem may be Trump’s tax and spending law, often called the “big, beautiful bill”,The Motley Fool. Trump signed this law on July 4, 2025. The law made individual tax brackets from the Tax Cuts and Jobs Act permanent.
In August, the Social Security Administration’s Office of the Actuary studied the impact of this law. This study was done after a request from Senator Ron Wyden of Oregon. The actuary’s office found that lost tax income will raise Social Security costs by $168.6 billion from 2025 to 2034, as noted by The Motley Fool. This includes both the retirement and disability trust funds. Because of this, the OASI trust fund could run out earlier, by late 2032. This means tax breaks may speed up the timing of benefit cuts. Still, Trump’s tax law is only one part of the problem.
Income inequality has increased, so more income avoids the payroll tax cap. Net legal immigration into the U.S. has declined in recent years. Migrants are usually younger and pay payroll taxes for many years. All these demographic changes hurt Social Security more than the tax law alone. There is no simple fix to solve Social Security’s problems. The longer Congress waits, the more painful the solution will be for workers and retirees.
Many retirees also miss out on ways to increase their Social Security income. Some strategies could boost benefits by as much as $23,760 per year, as cited by The Motley Fool. Learning how to maximize benefits can help retirees feel more secure. Overall, new tax breaks may feel helpful now, but they could weaken Social Security in the long run.
Social Security is running low on money because of long-term funding gaps, aging population, and lower tax income.
Q2. How do new tax breaks affect Social Security?
Tax breaks reduce the payroll taxes collected, which can speed up future benefit cuts.
If nothing changes, big benefit cuts could happen within the next seven years. Many factors are hurting Social Security, but new tax breaks under former President Donald Trump may be one reason. Social Security has a long-term funding gap of $25.1 trillion over the next 75 years, as stated by The Motley Fool. This means future money coming in will not be enough to pay all benefits and costs. The $25.1 trillion shortfall has been growing steadily for the past four decades.
Social Security trust fund risk
Another big worry is the Old-Age and Survivors Insurance (OASI) trust fund, which pays retirees and survivors. The Trustees estimate that the OASI trust fund reserves will run out by 2033. These reserves are extra money saved since Social Security started and are invested in government bonds by law. Even if the reserves run out, Social Security will not stop paying benefits completely. Social Security will still collect money from the 12.4% payroll tax on wages and salaries.This means Social Security will not go bankrupt or disappear. However, if reserves are gone, full benefits cannot be paid anymore. Retirees and survivors could see benefit cuts of up to 23% if reserves run out in 2033. A major reason for this problem may be Trump’s tax and spending law, often called the “big, beautiful bill”,The Motley Fool. Trump signed this law on July 4, 2025. The law made individual tax brackets from the Tax Cuts and Jobs Act permanent.
Trump tax breaks explained
These tax cuts lowered most individual income tax rates. The law also added temporary tax breaks that run from 2025 to 2028. Some seniors aged 65 and older can take an extra $6,000 deduction, or $12,000 for couples. Some workers can deduct up to $25,000 a year in qualified tips if their income is below set limits. Some workers can also deduct up to $12,500 in overtime pay, or $25,000 for joint filers. These tax breaks help people keep more money in their pockets. But they also reduce the income Social Security collects from taxes.In August, the Social Security Administration’s Office of the Actuary studied the impact of this law. This study was done after a request from Senator Ron Wyden of Oregon. The actuary’s office found that lost tax income will raise Social Security costs by $168.6 billion from 2025 to 2034, as noted by The Motley Fool. This includes both the retirement and disability trust funds. Because of this, the OASI trust fund could run out earlier, by late 2032. This means tax breaks may speed up the timing of benefit cuts. Still, Trump’s tax law is only one part of the problem.
Population changes hurt system
Bigger issues come from long-term demographic changes in the U.S. Baby boomers have been retiring for over a decade, increasing pressure on the system. There are fewer workers paying taxes for each retiree than before. People are also living much longer than when Social Security began in 1940. Social Security was not designed to pay benefits for several decades per person. The U.S. birth rate is now very low, which could reduce future workers.Income inequality has increased, so more income avoids the payroll tax cap. Net legal immigration into the U.S. has declined in recent years. Migrants are usually younger and pay payroll taxes for many years. All these demographic changes hurt Social Security more than the tax law alone. There is no simple fix to solve Social Security’s problems. The longer Congress waits, the more painful the solution will be for workers and retirees.
Many retirees also miss out on ways to increase their Social Security income. Some strategies could boost benefits by as much as $23,760 per year, as cited by The Motley Fool. Learning how to maximize benefits can help retirees feel more secure. Overall, new tax breaks may feel helpful now, but they could weaken Social Security in the long run.
FAQs
Q1. Why is Social Security facing benefit cuts?Social Security is running low on money because of long-term funding gaps, aging population, and lower tax income.
Q2. How do new tax breaks affect Social Security?
Tax breaks reduce the payroll taxes collected, which can speed up future benefit cuts.
