Personal Finance

5 Social Security Changes Trump Should Make - but Probably Won't

Maurie Backman

Published: January 30, 2025 11:11 am

Although millions of older Americans rely on Social Security to make ends meet, the program is filled with gaps and flaws that make it far from perfect. And one major issue it’s facing now is the possibility of benefit cuts once its trust funds run out of money.

Now that President Trump has taken office, he has the potential to make changes to Social Security. Here are some of changes his administration may seek to implement in the coming years, with the caveat that pushing these through may prove challenging and create all new problems.

1. Raising or removing the wage cap

Social Security is facing a funding shortfall in the coming years as baby boomers exit the workforce in droves and begin claiming benefits. The loss of all of that payroll tax revenue could force Social Security to implement broad benefit cuts as early as 2035.

One solution to that problem would be to raise or even eliminate the payroll tax cap. Currently, workers only pay Social Security taxes on wages up to a certain point that changes from year to year. In 2025, the wage cap is $176,100, and earnings beyond that point aren’t taxed to fund Social Security. If that cap were to be lifted or raised substantially, it could pump a lot more money into Social Security.

That said, the problem here is twofold. First, higher taxes burden working Americans. And while this change would only apply to higher earners, there could still be a world of backlash.

Also, Social Security pays a maximum monthly benefit. Increasing taxes on higher earners would likely mean having to raise the program’s maximum benefit to keep things fair. It’s unclear as to what the net gain would be for Social Security, and whether an increased payroll tax cap would truly pump more revenue into the program.

2. Pushing full retirement age back a year or two

Full retirement age (FRA) is when seniors can collect their complete Social Security benefit each month without a reduction. For anyone born in 1960, FRA is 67.

Trump may seek to push FRA back to 68 or 69 to encourage people to work longer and pay more into Social Security. But moving FRA back a year or two could effectively force many people to work longer rather than encourage them, so this solution to Social Security’s fiscal woes is likely to be met with strong opposition.

3. Changing the way COLAs are calculated

Each year, Social Security benefits are eligible for a cost-of-living adjustment, or COLA. The purpose of COLAs is to help ensure that inflation doesn’t erode the buying power of Social Security benefits.  

Since COLAs are pegged to inflation, during periods when living costs rise rapidly, Social Security benefits tend to increase more substantially from one year to the next. During periods when inflation declines or remains flat, Social Security benefits tend to remain flat (benefits cannot decrease from one year to the next).

The problem, though, is that Social Security COLAs have long failed to help seniors actually keep up with their living costs, largely due to a flaw in the way they’re calculated. Social Security COLAs are based on the Consumer Price Index for Urban Wage Earners and Clerical Workers, but that index does not accurately capture the costs that retirees tend to face.

Many feel that to make COLAs more effective, Social Security should base them on the Consumer Price Index for the Elderly, which measures costs that are specific to retirees. This change could have a positive impact on Social Security beneficiaries, but it’s unclear as to how much Trump wants to prioritize it, or whether it will get broad approval.

4. Expanding delayed retirement credits

Seniors who hold off on claiming Social Security past FRA can accumulate delayed retirement credits up until the age of 70. Delayed retirement credits are worth about 2/3 of 1% per month, resulting in an 8% boost to Social Security benefits for each year a claim is delayed.

If the delayed retirement credit program were to be expanded beyond age 70, it would most likely encourage some seniors to work longer and pay more into the program. But it’s unclear as to how many people would actually take advantage of the opportunity to delay Social Security beyond age 70. And there’s also the concern that wealthy retirees would simply end their careers earlier, stop paying taxes on their wages, live off of savings for a while, and then claim Social Security at a time when they can boost their benefits even more.

5. Raising benefits for low-income retirees

Many retirees today live on Social Security alone. For those receiving only modest benefits, it can be extremely difficult to make ends meet.

There’s been talk of expanding Social Security benefits for seniors on the brink of poverty, giving their monthly income a much-needed boost. But while this change would no doubt be an important one, it would also result in a core change to Social Security that lawmakers might hesitate on.

Lawmakers have long made it clear that Social Security is not a welfare program, and that eligibility for benefits hinges on paying in. It could be argued that increasing benefits for some seniors changes the program’s purpose, and as such, this is a shift lawmakers may not support.

We’ll need to wait and see what happens

Clearly, there’s a lot President Trump can do to change Social Security. But between a combination of lawmaker pushback and public backlash, there’s a good chance most of these changes won’t actually come to be. Or, if they do come to be, they’ll likely be phased in slowly.

Ultimately, though, we’ll need to sit back and see which elements of Social Security Trump chooses to focus on. Given his commitment to improving government efficiency and reducing wasteful spending, we can hope that at the very least, he’ll be taking a close look at Social Security and identifying ways to trim costs to improve the program’s finances.