President-elect Donald Trump has big ideas for government reform that include a new advisory body to be overseen by billionaire Tesla owner Elon Musk and former Republican presidential candidate Vivek Ramaswamy, called the Department of Government Efficiency (DOGE).
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DOGE would go after cutting “unauthorized funds” to streamline government efficiency, and would also encourage Trump to draw upon a process known as impounding, where the president can refuse to spend money allocated by Congress, according to AP News. There is concern that this could include funding for essential services that many retirees rely upon, such as Social Security and Medicare.
Experts discussed how such cuts could affect retirees.
Possible Cuts to Social Security and Medicare
When campaigning for Trump, Musk promised to cut $2 trillion from the U.S. federal budget in year one. According to Chris Orestis, president at Retirement Genius, “He was honest with people when he said this would require suffering hardships in the short term until we can arrive at the long term benefits.”
Musk and Ramaswamy have since downgraded that amount to $500 billion, but the question remains: Where will it come from?
The 2024 budget for Medicare, Medicaid, Affordable Care Act (ACA) subsidies and Social Security makes up about 50% of the federal budget, Orestis said, so to make these cuts a reality, “there are only a few places you can go, and despite any promises to the contrary this would include putting all entitlement programs on the chopping block.”
Retirees should pay close attention to the promises that were made on the campaign trail and try to plan for the real possibility of cuts and/or disruptions to everything from healthcare benefits to housing and transportation subsidies to Social Security and Medicare, Orestis said. “For people living on fixed incomes who rely on these programs there is not much that can be done to compensate if cuts of this magnitude are implemented.”
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Changes to Benefits and Calculations
Alan Andrews, a commercial consultant with KIS Finance, understands that retirees are nervous about possible changes to these essential programs. He proposes that while it is likely that Social Security and Medicare would “get a close look” under a DOGE advisory body, direct cuts might not be the first move, but rather changes like “raising the retirement age or tweaking benefit calculations.
“Medicare might also cut down on administrative costs, but that could mean some of them shift to those using the services. The challenge here is obvious: trimming waste without hurting what people depend on,” Andrews said.
Possible Delays in Benefits
One possible result in lieu of Social Security being cut altogether is the possibility of Social Security payment delays, which could stretch from weeks into months under DOGE’s planned workforce cuts, leaving many retirees in a precarious financial position as they wait for benefits processing, said Yehuda Tropper, CEO of Beca Life.
“For seniors receiving Veterans’ Affairs (VA) healthcare, reduced medical staff and administrative personnel would mean longer wait times for processing disability claims and getting medical appointments and prescriptions,” he added.
Be Prepared but Don’t Panic
Andrews said it’s fair to be cautious but feels there’s “no need to hit the panic button” because, he said, “Musk’s history, like slashing Twitter’s (now X) workforce by 80% and still keeping it running … shows he’s capable of making bold moves work. If he can bring that same kind of focus to the government, we might see systems that are streamlined, yet still effective.”
That said, Social Security and Medicare aren’t tech companies. “They’re far more complicated, so retirees need to be prepared. Diversifying income, looking at supplemental insurance or even just staying informed will make a big difference.”
Prepare For Fewer Resources
If DOGE is able to get off the ground and push Trump to achieve its aims of successfully cutting waste and the government can funnel those savings back into programs that bolster retirees, it could strengthen these programs for the future, Andrews said. “But this only works if those savings get reinvested where they’re needed. If not, the risk is that retirees end up with fewer resources overall.
“At the end of the day, there’s no crystal ball for how this plays out. Musk’s efficiency mindset offers some hope, but it’s always smart to be prepared for whatever comes next. Retirees don’t need to panic, but they should definitely pay attention,” Andrews said.
Orestis said that while their intentions to eliminate waste may be right, “the means by which to get there may be too draconian in such a short period of time.”
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: 5 Ways Elon Musk’s Plans for Government Efficiency Could Affect Your Retirement
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