Before his reelection campaign, President Donald Trump voiced support for eliminating federal taxes on Social Security benefits—a move that could significantly impact retirees.
According to the Social Security Administration (SSA), nearly 69 million Americans currently receive benefits.
However, not all recipients are taxed. The SSA notes that “about 40% of people who get Social Security must pay federal income taxes on their benefits.”
If these taxes were removed, qualifying Americans could save an average of $550 annually, based on estimates from the Tax Policy Center.
Some may save much more, and the financial benefits could continue to grow in the future. Here are four smart ways retirees could use that extra money if Social Security taxes are cut.
1. Boost Your Emergency Savings
Financial experts often suggest having at least three months’ worth of living expenses saved, but retirees are encouraged to aim for six to nine months.
Yet many fall short. A recent report by the Employee Benefit Research Institute (EBRI) found that only 59% of retirees have at least three months in emergency savings, down from 69% in 2022.
Moreover, 36% have faced unexpected expenses in retirement. If you receive a tax break on your Social Security benefits, consider depositing that money into a high-yield savings account to help cover future financial surprises.
2. Invest in Dividend-Paying Stocks
Using unexpected savings to invest can help grow your wealth and provide additional income. Dividend-paying stocks are especially attractive to retirees looking for steady returns.
Despite market fluctuations in 2025, dividend stocks have performed well. For example, the S&P 500 Dividend Aristocrats have posted a nearly 3% gain.
Other dividend-focused stocks have seen even higher returns, as reported by the Wall Street Journal. Investing your savings could help you manage risk and build long-term financial stability
3. Use the Extra Funds for Travel
Retirement is the perfect time to enjoy life and travel. AARP reports that nearly 70% of Americans over age 50 plan to travel in 2025.
Whether you’re planning a luxury getaway or a simple road trip, using extra savings to cover travel expenses can ease the financial burden.
With airfare and hotel prices influencing travel decisions—51% and 50% of Americans cite these costs as major factors, according to Skyscanner—it makes sense to apply any new savings toward these rising expenses.
4. Set Aside Funds for Big Purchases
Rising inflation and tariffs have made large purchases more difficult for retirees, many of whom rely on Social Security as a primary income source.
Setting aside tax savings for major expenses—like home repairs, appliances, or medical needs—can provide peace of mind.
Keeping the funds in a high-yield savings account allows them to grow until you’re ready to make a purchase.
While it’s still uncertain whether Trump will succeed in removing taxes on Social Security benefits, any changes would require congressional approval.
In the meantime, preparing for a possible tax break by planning how to use those funds can help strengthen your retirement finances.
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