7 Shakeups That Could Happen to Retirees in the First Year of Trump’s Presidency
Written by
Tobi Opeyemi Amure
Edited by
Rebekah Evans
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Among many other groups of people, retirees could feel the economic impact of President Donald Trump’s second stint at the White House. In his first term, Trump completely redefined economic policy with corporate tax cuts and an “America First” plan. Now, as his second term begins, a crucial question emerges: What is Trump’s agenda going to mean for retirees?
“[…] We could see select executive actions aimed at Social Security and Medicare and unforeseen market reaction,” said Andrew Lokenauth, founder of TheFinanceNewsletter.com. “Retirees should find themselves ready for sudden policy changes which could immediately reshape their finances.”
Retirees may experience some serious shakeups and this article will discuss seven of them, along with crucial retirement advice in this new political era.
Potential Elimination of Social Security Benefit Taxation
Many retirees will get an immediate tax break if President Trump follows through on his promise to eliminate federal taxes on Social Security benefits, as reported by CNN. It could be one of his early executive orders since he was opposed to taxing seniors on Social Security before becoming president, according to his Truth Social account.
Removing taxes on Social Security benefits would also increase disposable income for roughly half of recipients, most notably higher earners who already pay taxes, Lokenauth said. But this could hasten the Social Security trust fund’s depletion by three years to 2031, according to the Congressional Budget Office (CBO).
Medicare Policy Modifications
Trump’s administration could have its thumb on the scale to force quick changes to Medicare. That might include changes to negotiations for drug prices and changes to the Medicare Advantage plan regulations. Such immediate change could affect retirees’ quality of healthcare coverage and costs; plans could change and out-of-pocket expenses for seniors could rise.
In the meantime, putting together an emergency fund that’s even larger might be a good idea to plan for the possibility of the costs of healthcare rising and falling.
Retirement Account Rule Changes
The new administration could use executive action to try to kill rules governing retirement accounts. As reported by Time, the fiduciary rule — which requires financial advisors to put their client’s interests first — is on his radar for a target. It could be relaxation over retirement age withdrawal rules or a tweak on contribution limits of 401(k) plans.
And that may change the way retirees manage their savings — and perhaps the long-term financial plans they pursue. These rule changes could put retirees on a prudent step of diversifying their retirement accounts in case these present risks. Additionally, retirees also want to know about cabinet appointments because they might be able to learn what direction the policy of retirement savings will follow.
Market Volatility and Investment Considerations
The new administration’s policies might lead to spikes and dips in the stock market right away. The immediate market response would have a significant impact on retirees’ portfolios, which could affect their retirement income or even their financial security.
These market movements may necessitate that retirees quickly reconsider their investment plans. “It might be worth considering taking defensive positions,” Lokenauth said, given potential market reactions. If retirees want to use initial market reactions to preview longer-term trends, they need to stay informed and adaptable.
Immigration Policy Effects on Social Security
Trump’s actions on immigration will not affect Social Security finances directly but may have an indirect impact. Lower contributions to immigrant workers’ Social Security may meaningfully help reduce the long-term solvency of this program. It could be during the largest domestic deportation operation in American history.
This would put more strain on the Social Security system and potentially delay benefits for living and up-to-date retirees. Retirees should consider how the long-term implications of their retirement planning will play out with these policies.
Tax Policy Shifts
Retiree taxes could be affected by quick changes through executive action. Capital gains tax treatment may change and retirement income may be affected by tax bracket adjustments. Trump also has suggested cutting taxes on such things as tips and overtime pay and this would undercut Social Security revenue. These changes could significantly affect the planning of retirees’ taxes and how the overall financial strategy is conducted.
Energy and Economic Policy Changes
Trump is set on energy deregulation, aiming to slash energy prices by 50% in a span of one year, according to NPR. This, along with tariffs, could lead to significant economic changes, affecting how much retirees pay for everyday essentials. Before retirees quit work, they should check their budgets and investment portfolios in view of energy cost and economic conditions.
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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