President-elect Donald Trump’s second term could ignite questions about retirement planning. Retirement planners are helping clients navigate new tax policies, market shifts, and economic forecasts to guide their clients effectively. “It’s crucial not to panic and make emotional financial decisions, especially in times of uncertainty,” said Derek Miser, investment advisor and CEO.
“They must stay informed about any possible policy changes, such as tax adjustments or healthcare reform.”
Miser advises clients to aim for a balanced retirement savings strategy without becoming overwhelmed. “Focus on tax legislation affecting retirees on how they save and access their savings,” he said. “These will be important when deciding where to save your money and what vehicles to use.”
President Joe Biden and President-elect Trump had vastly different approaches to economic policies that could affect retirement savings.
For example, Biden’s tax policy focused on increasing taxes for high-income earners and corporations, while Trump emphasized extending and expanding tax cuts to stimulate economic growth. “One question a retiree should ask their financial advisor is how any policy changes could impact their income and tax liabilities,” Miser said. “They need to understand the possible effects of tax policy shifts and changes to retirement account regulations.
Working with an advisory team, either tax or legal counsel, should be part of their wealth management team.”
Miser also suggests asking how to protect retirement assets from inflation or rising interest rates. “Inflation and rising rates can erode the purchasing power of fixed-income investments, so adjustments may be necessary to protect long-term savings,” Miser noted. Consider investments that offer growth or automatic cost-of-living adjustments.
Now is an excellent time to review your asset allocation, especially if you’re nearing or in retirement.
Navigating retirement amid policy changes
“Consider reducing exposure to highly volatile stocks or bonds sensitive to rate hikes and inflationary pressures,” Miser said.
“You might look into inflation-protected securities, like Treasury Inflation-Protected Securities (TIPS).”
In addition, the Federal Reserve has raised rates in recent years to combat inflation, and further increases could continue. “This makes bonds and other fixed-income investments less attractive, while savings accounts may see higher yields,” Miser noted. “Retirees may need to adjust their portfolios to include more inflation-protected or dividend-paying assets.”
Increase contributions to your employer-sponsored retirement plan if you haven’t reached this year’s limit.
“The contribution limit for 401(k)s is $22,500 with an additional $7,500 allowed to catch up if you’re over 50,” said Melissa Pavone, founder. “Contributions to a traditional 401(k) reduce taxable income and lower your tax bill.” Self-employed individuals should consider contributing to a Simplified Employee Pension (SEP) IRA or solo 401(k). Miser suggested retirees have enough liquidity in their savings to cover unexpected expenses.
“Having cash set aside can prevent you from having to sell investments during a market downturn,” he said. “Finally, consider delaying Social Security benefits as it can result in a higher monthly payment, especially if there are changes in the cost-of-living adjustments (COLA) or other government policies.”
Medicare and healthcare costs are significant concerns for retirees, Miser noted. “If the new administration pushes for changes to Medicare or healthcare subsidies, this could impact out-of-pocket costs or the structure of healthcare access,” he said.
Retirees should look into healthcare plans, including Medigap policies, to ensure they’re adequately prepared. Eligible individuals can also open a health savings account (HSA), which offers triple tax advantages. Miser emphasized that while policy changes can impact retirement plans, proactive steps, informed decision-making, and staying adaptable are crucial.
“A well-structured retirement plan that accounts for tax, investment, healthcare, Medicare, legal documentation, and inflation risks can help ensure your financial future remains secure, regardless of the political climate,” he said.
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