Donald Trump is heading to the White House next year after defeating Kamala Harris in the 2024 presidential election. His return to the office, which he previously held from 2016-2020, could usher in policies that may have far-reaching effects on retirees nationwide.
“This country doesn’t have an income problem,” says Grant Cardone, equity fund manager and CEO of Cardone Capital. “It has a spending problem.” He believes Trump holds a similar view and will look to lower taxes and lower interest rates, which will benefit everyone, including retirees.
Other finance experts agree that Trump will likely promote lower taxes, but they aren’t convinced that retirees will be the beneficiaries. In fact, they worry that these policies could precipitate changes to Social Security, Medicare and other programs used by older Americans.
Here are five potential ways Trump’s next presidency could affect retirees:
— Eliminate taxes on Social Security benefits
— Accelerate the insolvency of the Social Security and Medicare trust funds
— Encourage lower interest rates
— Change retirement and health care programs
— Extend the Tax Cuts and Jobs Act of 2017
Eliminate Taxes on Social Security Benefits
The elimination of taxes on Social Security benefits could be the most direct impact of a Trump presidency on retirees.
“He’s proposing to get rid of the 50% and 85% tax on Social Security,” says Michael Foguth, president and founder of Foguth Financial Group in Brighton, Michigan.
That would put more money in the pockets of the approximately 40% of retirees who pay federal income tax on their benefits, according to Social Security Administration data.
Whether benefits are taxed is based on thresholds that haven’t been adjusted since they were enacted in 1983. As a result, single retirees with a combined income in excess of $25,000 could see up to 50% of their Social Security benefits become taxable. For married couples filing jointly, the threshold is $32,000.
In 1993, the law was changed to stipulate that up to 85% of benefits could be taxable for individuals with a combined income of $34,000 and $44,000 for a married couple filing jointly. Combined income is defined as one-half of a person’s Social Security benefits plus their adjusted gross income and nontaxable interest.
Eliminating taxes on Social Security would give older Americans a greater ability to pay for their expenses and may reduce spending on senior programs, according to Cardone. “It relieves the country from having to take care of the elderly,” he says.
Accelerate the Insolvency of the Social Security and Medicare Trust Funds
While eliminating taxes on Social Security benefits means more money in retirees’ pockets, “it takes money out of the tax coffers,” says Chris Orestis, president of Retirement Genius, a national information resource for older Americans and their families.
That could be problematic for the long-term solvency of the Social Security and Medicare trust funds. Taxes from retirement benefits are earmarked for these funds.
An analysis from the nonprofit Tax Foundation found that exempting Social Security benefits from federal taxes could bump up the insolvency date of the Social Security trust funds from 2035 to 2033. Meanwhile, the Medicare trust fund could become insolvent six years earlier, in 2030, as opposed to 2036.
Trump has also proposed eliminating taxes on tips. That, too, would mean less revenue going into the trust funds and possibly bumping up their insolvency dates further.
Encourage Lower Interest Rates
Throughout this year’s campaign, Trump has indicated that he will do what he can to reduce interest rates. During an August press conference, he suggested that he should play a role in the rate decisions made by the Federal Reserve. More recently, he proposed temporarily capping the interest rates on credit cards at 10%.
“I think that’s good for anyone across the board who has debt,” Foguth says of lowering interest rates.
Lower rates may also lower the cost of housing, according to Cardone. “I’m a real estate guy,” he says, noting Trump is too. He thinks Trump’s policies may boost the value of real estate investments for retirees and others.
Change Retirement and Health Care Programs
Social Security, Medicare and Medicaid could all see changes under a Trump presidency, according to some experts.
“Trump is well on the record as saying entitlements are wasteful and ripe for tax savings,” Orestis says. “As far back as 2000, he called Social Security a Ponzi scheme.”
That statement can be found in Trump’s 2000 book “The America We Deserve,” which he wrote with author Dave Shiflett. Within the book, Trump also suggested making the full retirement age 70 for those younger than 40, eliminating the Social Security earnings limit — which docks the benefits of early retirees who earn more than a certain threshold — and allowing Social Security funds to be invested in real estate portfolios, bonds or even stocks.
More recently, in a March 2024 interview, Trump was asked about entitlement programs such as Social Security, Medicare and Medicaid, and he replied there was “a lot you can do … in terms of cutting.” Later, his campaign said his comments were about waste within the programs.
Trump now vows that he won’t make any cuts to Social Security and Medicare, but his prior comments on the subject have led some to wonder whether changes to eligibility or benefits may occur during Trump’s second term.
Less ambiguous is Trump’s position on the Affordable Care Act and Medicaid. The president-elect has repeatedly called for an overhaul of the Affordable Care Act, a change that could impact early retirees who use the federal health insurance marketplace as a bridge for coverage until they become eligible for Medicare.
Trump’s 2020 budget proposal also called for reforms to Medicaid, including a rollback of a previous Medicaid expansion, and allowing states to consider savings and other assets when determining eligibility. This could affect retirees who use Medicaid to pay for long-term care expenses.
Extend the Tax Cuts and Jobs Act of 2017
Signed into law by Trump, the Tax Cuts and Jobs Act of 2017 was the most substantial reform of the tax code in recent decades. Its provisions were a mixed bag for many taxpayers. It eliminated personal exemptions but also increased the child tax credit. It capped itemized deductions for state and local taxes but nearly doubled the standard deduction.
The provisions of the law are scheduled to expire at the end of 2025, but there is a good possibility that Trump will want the law extended. That could be especially beneficial for high-income individuals and high-net-worth retirees, according to Orestis. The Tax Cuts and Jobs Act lowered tax rates and doubled the estate tax exemption compared to the previous law.
And should the extended tax cuts have the added benefit of boosting the economy — of that, there is no guarantee — they could drive gains in the stock market and the value of retirement funds. “For retirees, a good market solves a lot of problems,” says Foguth.
