What will the re-election of Donald Trump mean for your retirement security? What could be in store for Medicare privatization, prescription drug reform?
It’s too early for predictions, as we don’t know what the new administration’s policy priorities will be or how congress will respond. However, we’ll be watching several retirement policy issues concerning Social Security reform, Medicare privatization, threats to prescription drug cost protection, and more.
Steps that the new administration and Congress might take in any of these areas could have a major impact on the retirement landscape. So, let’s pull out the Ouija board and begin with the Social Security Administration.
Will The 2nd Trump Administration Address Social Security Solvency?
Though Trump hasn’t released an explicit plan for addressing Social Security’s looming solvency problem, the clock is ticking.
Social Security’s combined retirement and disability trust funds are on track to be depleted in 2035, according to the program’s trustees. Social Security expenses have been outpacing noninterest revenue since 2010, mainly because of low birthrates that translate into a declining ratio of workers paying into the program while more people are drawing benefits. If the reserves are exhausted, current workers’ payroll tax contributions would only be enough to pay 83% of the benefits promised to current and future beneficiaries.
So how will Trump address trust fund exhaustion? To date, he has said he will not cut Social Security benefits, but that he would address the solvency question through faster economic growth. The implication: If workers earn more income, they’ll pay more into the Social Security system. That is not a realistic solution—even 50% growth in real wages would only delay Social Security’s insolvency date by one year.
Meanwhile, several of Trump’s campaign proposals, when taken together, would hasten the insolvency of the retirement and disability trust funds by as much as three years, according to the Committee for a Responsible Federal Budget.
Those proposals include eliminating taxation of Social Security benefits paid by higher-income beneficiaries; ending taxation of overtime and tips; and restricting immigration and imposing stiff tariffs on imported goods.
Immigration restrictions would reduce the number of workers paying into the Social Security trust funds, and tariffs would either increase cost-of-living adjustments through higher inflation or reduce taxable payroll owing to reduced economic activity.
Project 2025, the governing blueprint developed for the new administration by the Heritage Foundation, does not address Social Security reform directly. However, the foundation supports boosting the retirement age to 69 from 67, with further increases indexed to US life expectancy—as do many Republican members of Congress.
Some legislators are already signaling that they’d like to address Social Security reform sooner than later. Next up? The impact of the 2nd Trump administration and the privatization of Medicare.
