Changes to Social Security: What’s true, what’s false and what to expect

Changes to Social Security: What’s true, what’s false and what to expect

Changes to Social Security are a favorite topic of the rumor mill and media these days. Our mission at this firm is to be a Sanctuary From The Noise® so we wanted to take a few minutes to address some of the rumors floating about and how things stand at this point.

When Social Security is broke in a few years, benefits will stop.

False. The trust fund will be depleted around 2033, but the program will still exist. At that time, benefits will continue but will be reduced by about 21%. The expectation that the trust fund would be depleted and that benefits would be reduced around 2033 has been known since 1983, when legislation was passed to keep the trust fund in good shape for approximately 50 years. The upcoming expected depletion is NOT the result of raiding the trust fund for other government spending. The upcoming expected depletion is caused by an expected spike in retirements as the baby boom generation ages.

The administration is cutting Social Security benefits to current recipients.

False. Neither President Trump nor DOGE has the power to change benefits. Only Congress can do that.  While Elon Musk has made dramatic statements about cutting the program, there are very few in Congress who want to cut benefits. President Trump has repeatedly stated he will protect Social Security.

Could Musk or others convince the President to change his mind and encourage him to recommend that Congress pass legislation to cut benefits? We suppose that is possible, but it is highly unlikely given how many legislators are vehemently opposed to any cuts to benefits and how unpopular the stance is with voters.

Getting Social Security benefits will be difficult for future recipients.

Possibly, but not because of any change in qualifications. The benefit amounts for future recipients are not affected by the administration. However, the Social Security Administration (SSA) recently announced that to better identify new applicants, applying by phone might no longer be permitted, with a few exceptions. Instead, benefits applications would need to be done online or in-person. With staff cuts and the closure of a few offices, if an applicant were not successful online, they would have the potential hassle of needing to go to a field office farther away and potentially facing longer waits once there.

Social Security taxation will change.

Probably – but exactly how and when is difficult to gauge. In 1983 with the trust fund near depletion, a host of changes occurred which resulted in higher full retirement ages, higher tax rates on wages, and more wages subject to tax. Currently, there is no movement to make similar changes, but it is probable that by 2033 Congress follows a similar approach. Notably, these changes would affect the taxes that workers pay to fund the Social Security system, not the taxes on benefits paid to retirees and other recipients.

It is possible that taxation of benefits could change before 2033. There is a bill to increase the thresholds for taxing benefits so more lower income people avoid taxes on benefits. Those thresholds were set more than 30 years ago and have never been adjusted for inflation. This would take funds out of the system. By contrast, there are also proposals to make more Social Security benefits taxable. Currently, for every $100 of benefits received by a high-income household, only $85 are subject to federal income taxes. Proposals remove the cap so all $100 would be taxable. This would add funds to the system.

Some people just got bigger Social Security checks.

True. On January 5, 2025, two years after its introduction, President Biden signed into law the Social Security Fairness Act of 2023. Both the Windfall Elimination Provision (WEP) and the Government Pension Offset (GPO) no longer apply to anyone. The WEP reduced a person’s own primary insurance amount if they received a pension from work that was not covered by Social Security tax. The GPO reduced a person’s benefit as a spouse or surviving spouse if they received a government pension from work they performed that was not covered by Social Security tax.

The Act is effective for any benefit months beginning in January 2024 or later, so the Social Security Administration (SSA) is increasing monthly benefits and retroactively making lump sum payments of the applicable increases not paid since January 2024. If you have been receiving reduced Social Security benefits due to WEP or GPO, you do not need to do anything as long as the SSA has your current mailing address and direct deposit information. If your April benefit check was not adjusted, or if you did not file for a spousal or survivor benefit at all because GPO would have eliminated any payments, you can call 1-800-772-1213 Monday through Friday, from 9:00 a.m. to 6:00 p.m. ET. When the system asks, “How can I help you today?”, say “Fairness Act” to get connected with a WEP-GPO trained representative. Be prepared to wait.

Don’t form opinions based on headlines.

True!  A recent story we saw had the headline “Changes coming for Social Security payments, direct deposit. What to know” with the subtitle, “The change comes as the agency plans to shutter dozens of Social Security offices throughout the country and has already laid out plans to lay off thousands of workers.” It is easy to think that because of the cutbacks, a current benefit recipient may have their payments altered or interrupted.

A full reading of the report explains that to improve security and identification procedures, new applicants or those who want to change their direct deposit information might need to use the Social Security website or come in person if they cannot verify their identity online. The article also explained that the agency has declared that the processing time for a direct deposit change, once identification is properly verified, would be one business day instead of the previous 30 days. Overall, this faster processing is an improvement for most benefits recipients who change their bank account but if one lives in an area with limited internet, is bad with technology, or is not near an office, we don’t blame them for not liking the change.

Warning to Social Security recipients using Turbo Tax:

A number of reports indicate some returns prepared in TurboTax are incorrectly reporting Social Security benefits as tax free for households whose Social Security benefits are partially taxable. If you use TurboTax and receive Social Security benefits, you should verify if the program reports your benefits on Line 6b properly. Use the worksheet in Publication 915.  If you filed a return with an incorrect amount of taxable Social Security, expect to hear from the IRS.

News and notes

: l-r) Eric Olson (U.S. Embassy Economic Counselor), Pablo Quirno (Minister of Finance), Kevin Keller, Abigail Dressy (U.S. Embassy Minister Counselor), Ileana Aiello (CEO/Founder of Garzon Capital Ltd), Dan Moisand, CFP (Delegation leader), Vladimir Werning (Deputy Governor of the Central Bank of Argentina), and Roberto Silva (President of CNV)

Moisand leads a delegation of financial planners to Argentina: 2023 CFP Board Chair Dan Moisand, CFP® co-lead CFP Board’s first ever Global Insights executive study program. Dan and company spent ten days in Argentina with stints in Buenos Aires, Patagonia, and Iguazu Falls. In addition to the tourism-based activities. The group engaged with top financial and regulatory experts to gain insights into Argentina’s evolving economy, sweeping fiscal reforms, evolving financial regulations and increasing demand for financial planning. The highlight of the business end of the trip for Dan was speaking at a reception thrown for the group by the U.S. Embassy at the beautiful Bosch Palace, hosted by Charge d’Affaires, and interim (Acting U.S. Ambassador) Abigail L. Dressel.

Florida Today asked Dan to write up a brief column about the trip, “Leading financial planners on trip to Argentina offers unique view of life outside US”

FPA Florida: Charlie Fitzgerald, CFP® continues to build his legacy of advocacy for the financial planning profession and the youth of Florida. He helped lead a group of eight financial planners from the FPA of Florida to the state capitol on March 11–12, meeting with about 40 lawmakers, including a stop in the governor’s office. They advocated for funding to support Florida’s new high school financial literacy requirement, emphasizing the importance of training teachers to ensure a successful rollout.

MFT named to the 2025 “Seminole 100” for the 7^th time:  The Seminole 100 recognizes the 100 fastest-growing Florida State alumni-owned or alumni-led businesses. (Co-owner Dan Moisand, CFP® graduated from FSU in 1989.) The program is run by the Jim Moran Institute for Global Entrepreneurship at FSU.

Important Dates:

June 15

• Q2 estimated tax payment deadline
• Q2 estimated tax payment deadline for sole proprietorships, single-member LLCs, C-corporations, and multi-member LLCs that elect to be treated as a corporation

June 30

• Deadline to file Free Application for Federal Student Aid (FAFSA), for prior academic year

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Yours truly,

The Team at Moisand Fitzgerald Tamayo, LLC