I’m a Financial Planner: Here’s What a Kamala Harris Presidency Would Mean If You Plan To Retire in 2025
Written by
Andrew Lisa
Edited by
Levi Leidy
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While the Democratic party coalesced around Vice President Harris as its standard bearer in the wake of President Biden’s nomination abdication, voters are looking for answers to pressing economic issues, like inflation and the ever-rising cost of living.
After securing the nomination, Harris has had a relatively short period to make her case to the American public, particularly to the millions of baby boomers set to retire in 2025 who might vote for or against her based on nest egg concerns alone, irrespective of their political leanings.
Most retirees and soon-to-be retirees probably aren’t yet familiar with Harris’ policies and philosophies regarding their benefits, taxes or income for next year — but the wise ones are eager to learn more, just in case.
“Information moves fast, and we are still absorbing its impact,” said Anthony DeLuca, CFP, an expert contributor for RetireGuide.com and holder of multiple security licenses, including Series 65 and Series 7 designations. “That said, it would be hard to imagine that Harris will steer far away from Biden’s anticipated policies. For someone retiring in 2025, their biggest focus should be on the economic front, especially if they are high-income earners.”
To learn how a Harris presidency could impact the plans of boomers eyeing a 2025 retirement, GOBankingRates consulted two financial planners, DeLuca and Michael Collins, CFA, and CEO and founder of WinCap Financial. Here’s what they advise next year’s retirees to consider when planning for a potential Harris presidency.
Harris Can’t Change 2025 Retirement Benefits, but You Can Use the Year To Plan
If Harris wins, her January inauguration will come too late for her to sign legislation that could impact Social Security and Medicare in 2025 — but new retirees should use that crucial first year as a chance to plan for adjustments Harris might pursue for 2026 and beyond.
“A Kamala Harris presidency could mean changes to retirement policies and benefits, so it is important for someone planning to retire in 2025 to stay informed and be prepared for potential adjustments,” said Collins. “While the impact of Harris’ policies on retirees will depend on her proposals, it is likely that her administration would prioritize strengthening Social Security and Medicare for retirees.”
According to Newsweek, Harris has endorsed the Biden administration’s goal of raising taxes on those who earn more than $400,000 to mitigate a pending Social Security solvency crisis. Currently, the payroll taxes that fund the program apply only to the first $168,600 in earnings.
Wealthy Retirees Should Expect To Lose Trump-Era Tax Breaks
President Biden’s overarching tax philosophy is that the rich don’t pay their fair share and that his predecessor’s policies favored the wealthy over the workers. Much of Donald Trump’s signature 2017 tax overhaul is set to expire in 2025, and Harris will probably carry Biden’s mantle on the issue.
“One of the biggest potential changes would be the removal of the Tax Cuts and Jobs Act (TCJA),” DeLuca said. “According to the numbers, the top 1% saw the biggest tax savings — $60,000 in 2025. The middle 20% will only see an annual savings of about $80 a month.”
Since a 2025 wind-down was baked into the legislation, one of the most consequential things Harris can do is nothing at all.
“[Harris], if elected, would most likely let the TCJA sunset,” DeLuca said. “Consequently, this would raise the personal income tax rate to 39.6% for individuals earning above $400,000. She, more liberal than Biden, would [likely] increase the corporate tax from 21% back to 35%, not Biden’s original 28% mark.”
Remain Flexible With Capital Gains and Estate Tax Planning
The IRS taxes long-term capital gains at a much lower rate than short-term capital gains, the latter of which investors harvest in the first year of purchasing a security. Since the wealthy collect a disproportionate amount of their income through capital gains, the outgoing president has suggested taxing those above a certain income threshold at a less forgiving rate — even long-term capital gains from securities held for more than a year.
“Biden had a policy idea that [Harris] might mimic, which taxes long-term capital gains and dividends as ordinary income for individuals with a taxable income over $1 million,” DeLuca said.
Many retirees also count on capital gains for income, and any changes to the IRS code under a Harris administration could impact their tax bill. Another policy that could shake things up for those approaching retirement involves taxes on the generational transfer of assets.
“Kamala Harris has stated herself that she would raise estate taxes on the wealthy and redirect this money to teachers,” DeLuca said.
Are My Investments Safe?
Presidents don’t directly control the markets that decide the fate of so many retirees’ nest eggs, but those markets certainly react to elections and policy changes.
“The stock and bond markets like predictability, so as long as Harris does not propose any radical changes to policy, the markets should stay on the rise,” Collins said.
No one can predict the markets, but DeLuca is confident that they would react more strongly to action from the central bank than from the current vice president or any other politician.
“What’s vastly more important is the economic numbers the Federal Reserve is seeing that gives confidence for two rate cuts this year and several more next year,” he said. “Their anticipated goal is for a policy rate of around 4.1% by the end of 2025. Lowering interest rates will drive long-term bond appreciation up and allow for freer movement of money. Cheaper loans build up smaller businesses and bolster the economy. I would be bullish on the markets over the next two years.”
Reevaluate Your Plan Regularly, New President or No New President
Both financial planners are encouraged that boomers are reimagining the possible scenarios and revisiting their strategies — but not because of changing political winds.
“Always look at your financial plan,” DeLuca said. “It doesn’t matter if there is a new president. Every six months, a financial plan should be revisited and adjusted as need be.”
Collins agreed.
“As for retirees, it is always a good idea for them to revisit their retirement plans whenever there is a change in the presidency or major shifts in the economy or market conditions,” he said. “This can help ensure that their financial plans are aligned with any changes that may affect their retirement savings.”
Editor’s note on election 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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