The senior citizens, myself included, will not tolerate a major cut in current social security benefits.
=> OK.
First a nit ...
Plan to enjoy my 73rd birthday in a few months. By current US standards that event makes me a senior citizen. Furthermore, due to my work history am also eligible for Social Security. However, have not signed up for the program, nor do I ever intend to do so.[1]
Continuing with the rest of the comment ...
Found the "will not tolerate" phrase interesting.
Why?
It implies folks can demand a benefit no matter the cost. As history has repeatedly demonstrated, that attitude never ends well – for nations or individuals.
Whichever party cuts social security will loose dramatically at the next regularly scheduled elections.
=> Believe any political party with a realistic assessment of current demographics would never attempt such a cut. As a consequence, expect all political parties will solemnly --and honestly-- swear to not cut Social Security benefits.
However, those promises won’t matter.
Why?
‘Cause existing law automatically reduces Social Security benefits in the early 2030s[2] when the trustees forecast the OASI trust fund will be depleted ...
... under current law, the differences between scheduled and payable benefits for OASI would begin in 2033, when the OASI Trust Fund is projected to become depleted.[3]
Believe a reasonable and prudent retired investor or a reasonable and prudent investor close to retirement should plan for the OASI trust fund --what most folks call SS-- to run dry in late 2030 with a corresponding 30% benefit haircut;[4] thereafter (due to ever fewer workers per beneficiary) that investor should expect a continuing decrease of real (as opposed to nominal) SS benefits.
Best wishes,
Kiisu
1. Have several reasons for making such a choice.
One is SS comes with the mandatory benefit of Medicare. Prefer to avoid that scheme 'cause due to Uncle's complex rules and low reimbursement rates, some doctors no longer accept medicare patients. If reimbursement rates continue to decrease --which I believe is probable-- expect more doctors will shun medicare patients due to economic necessity.
Also have financial concerns regarding the long-term financial viability of Medicare.
The estimated depletion date for the HI trust fund is 2033, 3 years earlier than projected last year primarily due to the change in projected expenditures. HI expenditures through the short-range period are projected to be higher than last year’s estimates. This increase is mainly a result of higher-than-anticipated 2024 expenditures and higher projected spending for inpatient hospital and hospice services. "2025 Annual Report Of The Boards Of Trustees Of The Federal Hospital Insurance And Federal Supplementary Medical Insurance Trust Funds" . ht tps://www.cms.gov/oact/tr/2025
Due to the near simultaneous depletion of the Social Security and Medicare trust funds, expect the early 2030s will be rather interesting.
Life in the US will likely become even more lively if Uncle's debt service cost continues to increase from its current 23.2% of total revenue -- believe the odds of that event are effectively 100%. The real questions are how much higher and how soon.
. ht tps://www.fiscal.treasury.gov/files/reports-statements/mts/mts0925.pdf
Due to the assumptions built into its fiscal model, the Congressional Budget Office's projection is --in my opinion-- unreasonably optimistic. Even so, the CBO states:
As the population ages and health care costs grow, outlays for the major health care programs measured in relation to the economy also rise over the next three decades, by 2.3 percentage points between 2025 and 2055. That year, outlays for Social Security, Medicare, and Medicaid for people age 65 or older account for more than 50 percent of all noninterest spending. . ht tps://www.cbo.gov/publication/61270
2. As mentioned previously, believe the projected depletion date for trust fund depletion is optimistic and depletion will occur before the published date.
3. ht tps://www.ssa.gov/OACT/TR/2025/tr2025.pdf
4. If we're lucky the benefit haircut will be slightly less and occur a bit later, but after depletion benefits will be limited by law to the funds available from the SS payroll tax:
If a trust fund became depleted and current receipts were insufficient to cover current expenditures, there would be a conflict between two federal laws. Under the Social Security Act, beneficiaries would still be legally entitled to their full scheduled benefits. However, the Antideficiency Act prohibits government spending in excess of available funds, so the Social Security Administration (SSA) would not have legal authority to pay full Social Security benefits on time. . ht tps://www.congress.gov/crs-product/RL33514
In the trustees report, the depletion date for:
- the low-cost scenario occurs in 2036
- the high-cost scenario occurs in 2031.
Changes to the law --enacted after the report was published-- moved the depletion date closer to today. However as compensation, seniors will --until 2028-- receive a new deduction:
The 2025 Act introduced a temporary senior deduction for tax years 2025–2028: individuals age 65 or older can claim $6,000 ($12,000 for joint filers), whether they itemize or not. Both spouses can qualify on a joint return. The deduction is reduced by 6% of any MAGI over $75,000 (single) or $150,000 (joint), and it is in addition to the regular standard deduction for seniors and the blind.
Notably, this new deduction is not directly related to Social Security benefits—whether a person aged 65+ receives Social Security benefits or not, they will still be eligible for the deduction. More specifically, the new deduction is a “below-the-line” deduction (i.e., taken after calculating AGI); thus, the deduction doesn’t impact the taxability of Social Security benefits (which is calculated in part using AGI).
For tax planning purposes, remember the new deduction is not linked to Social Security benefits, and the tax rules for those benefits remain unchanged after the 2025 Act. If seniors mistakenly think Social Security is now tax-free, they may make choices—like Roth conversions—that raise taxable income and increase the amount of Social Security benefits subject to tax. For example, converting $100,000 from a 401(k) to a Roth adds $100,000 to income, which can make more of their Social Security benefits taxable. Beneficiaries should understand that the new law does not change this outcome. . ht tps://tax.thomsonreuters.com/news/2025-tax-act-myths-social-security-tax-rules-unchanged-new-senior-deduction/ |
