Before being reelected, President Trump embraced the idea that retirees shouldn’t have to pay taxes on Social Security benefits. There are currently nearly 69 million recipients, according to the Social Security Administration (SSA).
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However, not all Social Security recipients have their benefits taxed. “About 40% of people who get Social Security must pay federal income taxes on their benefits,” according to the SSA. Qualifying Americans being taxed on Social Security payments can expect annual savings of $550, according to the Tax Policy Center, though some could save substantially more. Savings would grow for future years.
Here are four smart money moves to consider if Trump cuts taxes on Social Security benefits.
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Grow Your Savings Account
Financial advisors commonly recommend having a minimum of three months of living expenses saved. It’s wise for retirees to save even more, targeting at least six to nine months of living expenses.
Unfortunately, many retirees don’t meet this threshold. “Overall, 59% of retirees said they have three months of emergency savings, down from 69% in 2022. Yet, one in three (36%) retirees have experienced unexpected spending needs since their retirement,” according to the Employee Benefit Research Institute (EBRI).
For retirees struggling to save, it’s best to put the extra funds in a high-yield savings account to reserve for unplanned expenses.
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Purchase Dividend-Paying Stocks
A fantastic way to use unexpected savings is to grow the funds. Investing in dividend-paying stocks can be a good way to accomplish this and create an additional income stream during retirement.
Despite market uncertainty in 2025, dividend-paying stocks have fared well. The S&P 500 Dividend Aristocrats, as one example, has gained nearly 3%. Other dividend payers have gained significantly more, according to the Wall Street Journal. Using unplanned savings to manage risk and grow wealth can be an effective way to attain both.
Use the Funds To Travel
Why not use extra savings to fund something fun like travel? Nearly 70% of Americans over 50 are planning to travel in 2025, according to AARP. Perhaps you can use savings to pamper yourself on vacation or simply cover costs.
Travel expenses, like other costs, do increase. Americans say that cost dictates their travel. Airfare and hotel costs, at 51% and 50%, respectively, impact travel decisions, according to Skyscanner. For retirees concerned about travel costs, using the savings can be a good way to manage travel-related expenses.
Save For Large Expenses
Inflation has been problematic for many Americans. Additionally, tariffs have the possibility of furthering pain when shopping. Worse yet, Social Security is a major source of income for many retirees. This can make major purchases troublesome, at best.
Applying savings toward large expenses is a good way to mitigate impact on a budget. The funds can be set aside in a high-yield savings account to grow with other deposited monies to enable purchasing larger items when the need arises.
It’s not a done deal that Trump will attempt to eliminate taxes on Social Security benefits. Any changes to Social Security require an act of Congress. If that does come to pass, consider one of these money moves to bolster your finances.
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This article originally appeared on GOBankingRates.com: 4 Best Money Moves Retirees Should Make If Trump Cuts Social Security Taxes
