Retiring in 2025? Here’s How Biden’s Economic Policies Are Still Affecting Your Retirement
Written by
Deborah Sabinus
Edited by
Zuri Anderson
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Economic policies are constantly changing. If you’re planning to retire in 2025, it’s important to know how current economic policies can impact your retirement savings and rethink your retirement plans.
Jeff Bernier, founder, president and wealth advisor at TandemGrowth Financial Advisors, LLC, said retirement isn’t about saving — it’s about creating a plan that lets you enjoy life on your own terms.
“Financial security in retirement doesn’t happen by chance — it happens with a strategy,” he noted.
Although Biden’s administration is now over, many of his policies still shape the financial landscape. Everyday costs are still increasing, and next year’s Social Security increase might not fully cover your bills. On top of that, some tax cuts from 2017 are ending in 2025, and new proposals for income taxes could affect your overall finances.
In this article, GOBankingRates breaks down these changes and practical steps to protect your retirement plans.
Inflation and Cost-of-Living Adjustments
The 2022 Inflation Reduction Act (IRA) was aimed to fight inflation while boosting clean energy and healthcare during Biden’s administration. Though inflation dropped from 9.1% in 2022 to 3.3% in May 2024, retirees still struggle with high prices for housing, food and medical care.
In 2023 and 2024, the yearly Cost-of-Living Adjustments (COLAs) for Social Security claimants were 8.7% and 3.2%, respectively, which are historically high. While this helps reduce inflation, retirees who use their savings still face low purchasing power.
With that said, plan for long-term price hikes in retirement. Consider inflation-friendly options like TIPS (treasury bonds tied to inflation) or annuities that adjust for rising costs. If unsure, talk to your financial advisor.
Tax Policy Changes
Biden’s tax proposals focused on raising revenue from high earners and corporations. Despite the 2023 debt ceiling deal that spared Social Security and Medicare from immediate reduction, it affected the retirees directly.
The SECURE 2.0 Act, passed in 2022, increased the age for Required Minimum Distributions (RMDs) from retirement accounts to 73 in 2023 and 75 by 2033. This allows retirees to defer taxes on withdrawals longer.
However, those turning 75 after 2033 must plan carefully to avoid penalties. Proposed capital gains creates tax hikes for households. Likewise, the $1,000 cap on state and local tax (SALT) deductions remains a burden for retirees in high-tax states like California or New York.
Healthcare Costs and Medicare
The Inflation Reduction Act (IRA) continues to shape retirement planning through mixed outcomes. The IRA introduced measures like a $2,000 annual cap on Medicare Part D out-of-pocket prescription costs.
However, these gains are offset by challenges such as $6,315,000 saved solely for healthcare costs. This highlights the growing financial burden on retirees. Biden’s policies aimed to curb expenses like drug prices, high Medicare premiums and healthcare inflation, which mount pressure on retirement savings.
Utilize tools like Health Savings Accounts (HSAs) to save money on medical expenses and budget for higher insurance costs.
Social Security Uncertainty
Social Security’s trust funds are projected to be depleted by 2034, which could lead to a 20% cut in benefits if no changes are made, according to the Social Security Administration. Biden suggested raising payroll taxes on people earning over $400,000 to help fix the program, but political disagreements slowed down these changes.
If you’re planning to retire in 2025, this uncertainty means it’s wise to have multiple sources of income instead of depending on Social Security. For example, waiting until age 70 to claim benefits can boost your monthly payment by 24% compared to starting at age 67.
Prepare for possible cuts by stress-testing your retirement plan with either part-time work or delaying Social Security benefits to maximize your payouts.
Labor Market and Retirement Savings
During Biden’s administration, the employment rate increased with an average of 15 million jobs and one of the lowest unemployment rates. This helped older workers stay employed longer and boosted their retirement savings.
Reforms like SECURE 2.0 made it easier for workers to save by enrolling them in 401(k) plans, encouraging them to contribute to their 401(k) or 403(b). They also allow employers to match student loan payments with retirement contributions.
Meanwhile, student debt relief has helped over 4 million borrowers since 2021, freeing up money that can now go toward retirement. So, if you’re still working, you should take full advantage of catch-up contributions. With this, you can add an extra $7,500 to your 401(k).
Conclusion
Planning to retire in 2025? You’ll need to balance policy-driven challenges and opportunities for 2025 retirement. Inflation and healthcare costs demand careful budgeting and a flexible job market to help grow your savings and minimize your expenses especially with the current administration. While staying informed, continue adapting to evolving economic shifts. Focus on what you control, and solidify your retirement plans.
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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