Always thinking about Social Security

Plus: Coming off a fresh job loss

Hi friends,

I was laid off on Monday and it feels like weeks have passed, though apparently it’s been three days. I haven’t had much downtime yet as I’ve been emailing everyone I know who could possibly have a lead for work, scheduling calls, and trying not to fall into the existential abyss.

It’s most painful to see this happen to so many of my wonderful colleagues who poured their hearts and souls into their jobs, many of whom have children or are about to; at least I only have to worry about my husband and my cat :)

I will naturally be Writing Through It all here, the layoff process and the financial/emotional toll. It’s a pretty terrible time for job seekers, so maybe there are others who want to commiserate in the comments? Just this once. (If you have recently gone through a job loss, I’d love to chat!)

Below are a couple of things that have been on my mind, but future newsletters will include more original ideas and essays that I’ve been toying with writing for a while. Woohoo!

In today’s issue:
1. Social Security assurance
2. No more taxes on home sales?
3. Links

---

How’s everyone feeling about Social Security?

Everyone’s worried about Social Security and no one seems to be doing anything about it.

Each year, the Social Security and Medicare Trustees report comes out and we freak out anew about the dire state of the program. This has been true since I started covering the topic over 10 years ago and was likely true before then. This year, somehow, things got even bleaker, and the report shaved a few more months off of the retirement trust fund’s insolvency date. And that didn’t take into account the tax bill recently passed by Republicans, which is going to make it even worse by further reducing flows into the program.

So none of that is great. However, I think many people don’t have a completely accurate view of what this means. “Insolvency” sounds scary, and it is, but it basically means that the trust fund can’t pay out full benefits on time. In that case, money coming into the program at the time will be paid out (primarily payroll taxes). That means a benefit cut, but there will still be something paid out—an estimated 77% of projected benefits.

“Alicia,” you’re saying, “that doesn’t exactly make me feel any better. Why should we get less than our parents?” And I agree, of course. I’m also staring down a benefit cut despite paying quite a bit in taxes. It would be great if our representatives in Washington did anything to help younger generations feel even slightly better about their financial stability.

Because Congress actually does have a few levers it can pull, each of which will be unpopular and irritate someone. It could raise the full retirement age, meaning the age at which Americans are allowed to claim their max benefits, which has been done in the past (people can still claim earlier, but get a smaller check). It could also raise taxes in a variety of ways.

One thing people may not know: While the U.S. generally has a progressive tax regime (not in the political values sense, but meaning you pay a higher tax rate the higher your income climbs), Social Security is slightly regressive. In 2025, you only pay Social Security taxes on the first $176,100 of income. That means the affluent who earn more than that aren’t taxed on all of their earnings while those earning less are. And of course, the Social Security program loses out on those dollars. So that could be tweaked.

Whatever the decision, it will cost someone something. And by someone, I mean likely some cohort of young people. Because if Congress does something now or in the future, millennials/Gen Z/the generations after will be the ones impacted by those changes (maybe some Gen X, too). So while current retirees get to enjoy their full benefits and also a slew of tax cuts in the new bill, younger generations will face a financially painful change of some sort: higher taxes, a later retirement, or less generous benefits. Or maybe all 3!

---

No tax on capital gains for home sales?

It surprises some people to learn that if you sell your home, you could owe taxes on any profit, or difference in value from when you bought to when you sold. Similar to some investment income, you could pay capital gains taxes. But most people don’t actually end up paying it: there is a federal capital gains exemption on the sale of your primary residence up to $500,000 for married couples (half that for individuals). So if you bought a home 10 years ago for $300,000 and sold it today for $750,000, you wouldn’t owe any federal capital gains. It’s been this way for about 30 years.

President Donald Trump said this week he’s “thinking about” eliminating capital gains on home sales altogether, something it seems unlikely he has the authority to do but is nevertheless notable. There’s been a push lately to get rid of the tax by people who say it’s another obstacle in the current housing market, though economists don’t, generally, seem to be convinced of that.

That’s because the current tax break covers most home sales; the median price of a home sold in June was $435,300, according to the National Association of Realtors, which is less than the max exemption amount. But it is covering increasingly fewer given how expensive homes have gotten recently: while 3% of home sales exceeded the $500,000 capital gains threshold in 2019, nearly 8% did in 2023, according to a 2024 report from real estate data firm CoreLogic. Though it still seems small I find that stat kind of amazing—that’s almost triple the share in just 4 years! Covid really did a number on everything.

But some people argue that some homeowners—particularly Boomers who have owned their homes for a long time and therefore have seen huge increases in value—aren’t selling because they can’t afford the possible tax bill, which in turn is smothering inventory and locking out young people from being able to buy. What we would hope would be the normal lifecycle of a home is stalled because people who might want to downsize won’t (or can’t) do it.

I recently wrote a story about this tension, which is a special consideration for long-time owners in select pricey markets in California, Florida, and New York, especially if they are married. Morbidly, some couples are waiting for one of the spouses to die, because then the other will inherit the house at its current fair market value; they can then sell and not worry about paying the capital gains at all.

It’s not, like, the biggest problem in the housing market—17% of homes sold during the month of June were priced above $750,000—but in pricey pockets of the country it is prevalent. As soon as I published that story, a former coworker mentioned someone she knew was putting off selling for that exact reason. And when I spoke with Ken DeLeon, founder of DeLeon Realty, about this a few months back, he told me stories of aged would-be sellers with medical issues that made staying in their homes dangerous, yet they couldn’t afford to sell. No one wants that! Others can’t afford the taxes and finding a new place to live when everything is so expensive. Again, that’s not representative of every potential seller, but it is an issue for some.

This dynamic could possibly be keeping out some well-off young households, say one that includes someone working as an engineer at a FAANG, who certainly should be able to afford a home under normal circumstances. Would it be an issue if there was more supply?

But all that to say — it’s not affecting the average American. Eliminating the tax is basically a gift to the already wealthy (save some of the people I mentioned in select scenarios), and, like many Trump administration policies, older Americans.

---

Links

Not sure if I will continue to include a links section but for now I’m falling back on old habits. Some interesting things I’ve been reading/thinking about:

• I love love love Lindsey Stanberry’s Division of Labor series (and everything else she publishes). I’ve always been curious how people actually make it all work, or sort of work, and this is such a good look into real couples’ lives. It reminds me of when media sites used to publish fun, actually insightful content not driven by whatever Google decided should be the top priority of the day :)

• My friend Michela hosts the Financial Times’ Behind the Money podcast and this week’s ep is on the fight between big banks and private equity over junior talent. Not my normal area of interest but she does a great job making it compelling!

• Though I wasn’t the target demo, I’m very sad to hear that Next Avenue was caught up in recent federal budget cuts. It’s been such a great resource for retirement + personal finance content for older Americans.

• Another thing that’s going to cost you more soon.

• Speaking of, even Venus Williams can’t afford health insurance (something we newly have in common!).

That’s it for now. Talk soon,
A

P.S. If you know someone who would like this newsletter, please forward it along!
P.S.S. Thanks Christopher Skinner for the illustrations!