Based on an analysis from the nonpartisan Center on Budget and Policy Priorities, the poverty rate for retirees aged 62 and over would jump from 10.1% (as of 2023) to an estimated 37.3% if Social Security didn’t exist. Separate annual surveys from Gallup covering almost a quarter of a century have shown that 80% to 90% of retirees rely on their monthly Social Security income, in some capacity, to cover their expenses.
Maintaining the financial health of Social Security should be of the utmost importance for our nation’s elected officials. Unfortunately, the foundation of America’s leading social program is crumbling. While it’s in no danger of disappearing or going bankrupt, the existing payout schedule, including near-annual cost-of-living adjustments, is very much at risk.
President Trump: Official White House Photo by Andrea Hanks, courtesy of the National Archives.
There are a lot of reasons for the program’s projected shortfall, which has the potential for sweeping benefit cuts of up to 23% for retired workers and the survivors of deceased workers just seven years from now. One of those puzzle pieces of blame is President Donald Trump’s flagship tax and spending law, the “Big, Beautiful Bill.”
Before digging into the specifics of how the big, beautiful bill will adversely affect Social Security, some background on how the program is funded is necessary.
Social Security generates income three ways:
The 4% payroll tax on earned income from $0.01 to $176,100 (as of 2025).
The interest income earned on its asset reserves.
The taxation of Social Security benefits.
The payroll tax accounted for more than 91% of the close to $1.42 trillion brought in by the program in 2024. It’s this payroll tax component that is forecast to be negatively affected by Trump’s tax and spending law.
On July 31, Senator Ron Wyden of Oregon, the highest-ranking Democrat on the Senate Finance Committee, sent a letter to the Social Security Administration’s Office of the Actuary (OACT) to decipher what financial effects Trump’s big, beautiful bill would have on the program.
The OACT responded less than a week later with an estimate that called for a widening of Social Security’s deficit from 2025 through 2034 of $168.6 billion. Keep in mind that this estimate includes impacts to the Old-Age and Survivors Insurance trust fund (OASI) and the Disability Insurance trust fund.
The OACT’s findings are based on Trump’s big, beautiful bill reducing taxable income by:
Temporarily increasing the standard deduction for eligible taxpayers 65 and older by $6,000 (or $12,000 for jointly filing couples) from 2025 through 2028.
Temporarily providing eligible workers with the ability to reduce up to $25,000 in annual tips from 2025 through 2028.
Temporarily allowing eligible workers to partly deduct up to $12,500 of their overtime pay (or $25,000 for couples filing jointly) from tax year 2025 through 2028.
The cumulative effect of Trump’s law is that it speeds up the expected exhaustion of the OASI’s asset reserves by one quarter: from the first quarter of 2033 to the fourth quarter of 2032. In other words, Social Security is now just seven years away from sweeping OASI cuts for retired workers and survivor beneficiaries, based on the latest OACT analysis.
Image source: Getty Images.
While the OACT projection leaves little question that fixing Social Security will be that much more challenging, the big, beautiful bill takes a back seat to a host of ongoing demographic changes, in terms of weakening Social Security’s foundation.
Long before Donald Trump signed the bill into law, the Social Security Board of Trustees had been forecasting a long-term (75-year) funding shortfall for four decades, which has been spurred almost entirely by five ongoing demographic shifts:
Baby boomers retiring: Baby boomers leaving the labor force at a steady pace is pressuring the worker-to-beneficiary ratio.
Increased longevity: Beneficiaries are living considerably longer now than they were when the first retired-worker check was mailed out in January 1940. The program was never designed to pay benefits for multiple decades.
Rising income inequality: All earned income (wages and salary, but not investment income) up to $176,100 is subject to the payroll tax this year. However, the maximum taxable earnings cap (the $176,100 figure) has been rising at a slower pace than earned income for high earners over multiple decades, leading to more wages and salary being exempted from the payroll tax.
Net legal migration has tapered: For more than a quarter of a century, net legal migration into the U.S. has declined. Most legal migrants entering the U.S. are young and spend decades in the labor force contributing via the payroll tax before earning a retirement benefit of their own. This drop-off is leading to less payroll tax being collected.
The U.S. birth rate is at an all-time low: The last of these five ongoing demographic concerns is a record-low U.S. birth rate. Couples waiting longer to get married and have children will provide added pressure to the worker-to-beneficiary ratio in the decades to come.
Tackling these issues won’t be easy for lawmakers. But the longer Congress waits to get serious about fixing America’s leading retirement program, the more likely it is that sweeping benefit cuts become a reality seven years from now.
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