President Donald Trump has made it a priority to cut down on government spending. His Department of Government Efficiency (DOGE), headed by Elon Musk, has been looking into various government expenditures with the apparent intention of trimming the fat to achieve a net surplus. However, they may have to make tough cuts after getting through some of the easier expenses.
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Some people are worried about how efficiency and a goal for a fiscal surplus can impact Social Security payments. This article provides some expert commentary on that, plus some things you should do with your money with Trump as president.
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Is Social Security in Danger?
The program faces some hurdles that can impact its long-term viability, according to Jasmin Smoots, vice president of operations at PensionBee. Smoots presents the potential elimination of federal income taxes as one concern that can impact Social Security.
“Trump has most recently floated an explosive reform to eliminate federal income taxes, some of which fund Social Security. Replacing this income source would be difficult, as the Trump administration is generally in favor of cutting and slashing taxes across the board,” she said.
Trump’s policies suggested that he may replace federal income taxes with tariffs, but that can also create challenges. Smoots explained how expensive tariffs can get if the president wants to substitute federal income taxes with tariffs:
“The main potential replacement could stem from tariff funding, but the extent of tariffs that would be required to replace federal income tax is astronomical. Replacing federal income tax in its entirety would require tariffs as high as 75%, substantially above the incoming administration’s latest proposals of 25 to 35%. Without a credible replacement for any tax cuts, Social Security could easily become the victim of campaign promises.”
While it’s hard to gauge the future, it’s easier to create a plan and make some smart money moves during Trump’s presidency. These are some of the top ones to consider.
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Build Up Your IRA
Even if the Social Security program remains intact, it’s unlikely to provide enough financial support for retirees. Smoots suggested contributing as much as you can to your (individual retirement account) IRA. The contributions can come from a portion of your Social Security, a side hustle or another income source.
“Diversifying your income sources and supplementing Social Security income through an individual retirement account can significantly enhance your financial security and peace of mind,” she said. “IRAs are a powerful tool for retirement savings, but less than a third of households have a traditional IRA.”
Contribute To Your HSA
As people get older, healthcare expenses tend to go up. Smoots recommends building up savings in an HSA for as long as you can, even if it means finding part-time work.
“Retirees should prepare for rising healthcare costs by exploring supplemental insurance options, health savings accounts (HSAs) and long-term care insurance,” she noted. “These tools can help offset potential gaps in coverage and ensure financial security.”
Capitalize On Lower Taxes by Saving Up
It’s not all doom and gloom for Social Security, according to Chuck Czajka, certified Social Security claiming strategist and founder of Macro Money Concepts. While saving money is always a good practice, Czajka encouraged people to double down since Trump’s tax cuts will remain in effect.
“Trump’s election win does not give you a permission slip to change your retirement income planning. In fact, it gives you a window of tremendous opportunity in the short term,” he said.
“It looks like the Tax Cut and Jobs Act (TCJA) will most likely not totally sunset in 2025. This means taxes will be on sale for a few more years, creating a tremendous opportunity to convert your taxable retirement plans to a tax-free platform. Combined with other possibilities like tax-free Social Security benefits, this could help you totally fund your retirement needs.”
Own Your Number
It’s not only important to accumulate savings and plan for the worst-case scenario. Czajka also provided valuable insights about preserving your wealth instead of getting greedy.
“Another best practice is ‘owning your number.’ That’s right. Owning the number you require is way more important than risking your numbers. Losses can hurt more than gains can help once retired,” he said.
Once you have what you need, there isn’t as much of a reason to take big risks. Trump’s first presidency was a boon for the stock market, and the stock market may continue to rally during his second term.
However, any stock gains should justify taking risky positions.
Editor’s note on political coverage: GOBankingRates is nonpartisan and strives to cover all aspects of the economy objectively and present balanced reports on politically focused finance stories. You can find more coverage of this topic on GOBankingRates.com.
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This article originally appeared on GOBankingRates.com: If You Rely On Social Security, Make These 4 Money Moves With Trump as President
