6 Ways the Changes in Congress Could Affect Your Retirement
It's normal to feel some uncertainty about what impact potential policy changes could have on your retirement plan. Here's what to keep in mind for taxes, healthcare and Social Security.
The 2026 midterm elections are over, though a few races have yet to be called. Now the question is: What happens next, and what could the shifts in Congress mean for your retirement?
Washington is entering a period of divided government, with Democrats in control of Congress and a Republican presidential administration. That shift could influence the direction of tax policy, federal spending, Social Security and Medicare. It could also create uncertainty about what changes may, or may not, happen before the next presidential election.
You may be thinking:
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- Will taxes increase? (You can request a free copy of my bestselling book on tax planning, which features my research and what I think will happen with taxes in the future.)
- Could Social Security benefits change?
- What could happen with Medicare premiums and healthcare costs?
- Should you be doing anything differently with your investments?
These are important questions, but as the founder and CEO of Peak Retirement Planning, I believe there's one principle worth remembering: You don't have to predict what will happen in Washington to prepare for it.
Your retirement plan should be built around your goals, your income needs and the financial decisions within your control. Understanding the political landscape can help you prepare, but reacting to every headline is not a retirement strategy. As I always say, when in doubt, zoom out.
Today, I'm breaking down six areas where the changes in Congress could make a difference and what you can do to keep your retirement plan on track.
1. Major legislative changes could be more difficult
Legislation passed by Congress requires the president's signature to become law. If the president vetoes a bill, Congress needs a two-thirds majority in both the House and Senate to override it.
What does this mean for retirees? It could mean fewer sweeping legislative changes over the next two years. Democrats may introduce proposals involving taxes, healthcare and federal spending, but getting those proposals signed into law will require negotiations with the White House if Congress lacks the two-thirds needed to bypass a veto.
This doesn't mean nothing will happen. Congress still has to address annual spending bills, the federal debt limit and tax provisions scheduled to expire after 2028.
Those deadlines could create opportunities for both parties to negotiate.
For retirees, the takeaway is simple: Don't assume every proposal you hear about will become law. Pay attention to what is actually passed and how it affects your personal financial situation.
2. The national debt could put more pressure on future decisions
In August, the gross national debt passed $40 trillion. At the same time, interest payments on that debt have grown to exceed federal spending on national defense.
These numbers matter because the federal government has competing financial obligations. It must fund programs, pay interest on its debt and address long-term commitments such as Social Security and Medicare.
Why should retirees care? A growing national debt can put upward pressure on interest rates and inflation. It can also limit the government's flexibility when addressing future funding challenges.
That doesn't mean you should make dramatic changes to your retirement plan because of the national debt. But it does mean you should avoid building a plan that depends on today's tax rules and government benefits remaining exactly the same forever.
Instead, build flexibility into your strategy. Consider how your retirement income would hold up if taxes increased, inflation remained elevated or government benefits changed in the future.
3. Tax planning could become more important before 2028
Taxes are one of the most important areas for retirees to monitor, particularly if you have a pension, significant retirement savings or multiple sources of income (you can request a free copy of my bestselling book for those with pensions who are typically significantly impacted by taxes).
The 2025 One Big Beautiful Bill Act (OBBBA) made several changes to the tax code. It made the 2017 individual income tax rates and brackets permanent, increased the standard deduction and established a $15 million estate and gift tax exemption per person for 2026, adjusted for inflation.
However, "permanent" doesn't mean Congress can never change something. It simply means the provisions don't have a built-in expiration date.
Several other provisions are temporary, such as:
- The additional deduction for older people. Eligible taxpayers age 65 and older can receive an additional deduction of up to $6,000 per person, subject to income limits. This provision is scheduled to expire after 2028.
- State and local tax deduction. The higher $40,400 SALT deduction cap is scheduled to return to $10,000 in 2030.
A Democratic Congress could propose changes to tax rates, including higher rates for top earners or corporations. However, those proposals would face a likely presidential veto unless they were part of a negotiated agreement.
For now, the existing tax rules are likely to remain in place through 2028. That creates an important planning window.
For retirees, tax planning isn't just about how much you owe this year — it's about understanding how today's decisions could affect your taxes over the next 10, 20 or 30 years.
For example, a Roth conversion may make sense for some retirees who want to pay taxes on retirement savings now rather than potentially pay them later.
Qualified charitable distributions (QCDs) may also help eligible retirees manage taxable income while supporting charitable organizations.
Estate planning is another consideration, particularly for families with significant assets. The right strategy depends on your income, savings, tax bracket and long-term goals.
Work with your CFP® practitioner, CPA and estate planning professional to understand which opportunities make sense for your situation.
4. Social Security faces long-term funding challenges
Social Security is one of the biggest concerns I hear from retirees. Many people have spent decades paying into the system, and they want to know whether the benefits they've planned around will still be there.
The latest Social Security Trustees Report makes the long-term funding challenge more urgent. The retirement trust fund is now projected to run short in late 2032, when incoming payroll taxes would cover about 78% of scheduled retirement benefits.
It's important to understand what this projection means. Trust fund depletion does not mean Social Security disappears or that retirees automatically stop receiving benefits. It means the program would no longer have enough dedicated reserves to pay 100% of scheduled benefits without legislative changes.
Congress has several options to address the shortfall, including:
- Raising or eliminating the cap on wages subject to Social Security payroll taxes
- Increasing the payroll tax rate
- Raising the retirement age
- Changing the cost-of-living adjustment (COLA) formula
- Adjusting benefits for higher-income retirees
These are proposals that have been discussed for years. The challenge is finding an approach that can earn enough support to become law.
I believe it's wise to prepare for the possibility that Social Security benefits could change in the future. When building a retirement income plan, consider how your finances would look if Social Security provided less income than you currently expect.
Review when you and your spouse should claim benefits and make sure your overall plan doesn't depend too heavily on one source of income.
Hope is not a strategy. Having a plan that can withstand different outcomes is much more valuable.
5. Medicare and healthcare costs deserve your attention
Healthcare is one of the largest and least predictable expenses in retirement. It's also an area where government policy can have a direct impact on your budget.
Medicare's Hospital Insurance Trust Fund, which helps pay for Part A hospital benefits, is projected to be depleted in 2033. After that, incoming revenue would cover about 89% of hospital payments under current projections.
Medicare Part B premiums are another expense to watch. The standard monthly premium is $202.90 in 2026, and the Medicare Trustees project it could increase to $209.50 in 2027.
For people planning to retire before age 65, health insurance deserves even more attention. The enhanced Affordable Care Act (ACA) premium credits expired at the end of 2025. Benchmark marketplace premiums increased 26% for 2026, and insurers have proposed a median increase of 15% for 2027.
Democrats could propose restoring the enhanced ACA credits or expanding Medicare's drug-price negotiations.
However, those proposals would face the same challenge as other legislation: Getting agreement from the White House.
It's also worth remembering that not every Medicare decision comes from Congress. The administration plays a role in areas such as Medicare Advantage payment rates, prior-authorization rules and drug-price negotiations.
What should you do? Don't treat healthcare as an afterthought in your retirement plan. Build rising Medicare premiums and other medical expenses into your projections.
6. Don't let an election dictate your investment strategy
Whenever there's a major election, investors naturally wonder what the results will mean for the stock market. It's tempting to believe that one political outcome will be better for your investments than another.
But history suggests that reacting to election results is rarely a sound long-term strategy. Since 1970, the S&P 500 has increased during the six months following all 14 midterm elections, averaging a 15.5% gain.
Looking at the 12-month period after midterm elections dating back to 1874, the market posted a positive return after 32 of 38 elections.
These historical averages are interesting, but they don't predict what will happen next. The sample sizes are limited, and past performance never guarantees future results.
With divided government, some investors may expect fewer sweeping policy changes. But the stock market responds to much more than election results. Corporate earnings, inflation, interest rates and Federal Reserve policy have historically played important roles in long-term market returns.
My advice is to avoid making major investment decisions based solely on which party controls Congress. Instead, review your investment allocation, understand how much risk you're taking and make sure your portfolio supports the income you need throughout retirement to avoid sequence of returns risk.
Keep your retirement on track
After looking at taxes, Social Security, Medicare, the national debt and the markets, you might be wondering what you should actually do. The good news is that you don't need to have all the answers about what Congress will do next.
Here are two practical steps you can take now:
Review your goals. You created your retirement plan for a reason. Take time to make sure those goals still reflect the life you want to live. Are you planning to:
- Travel more?
- Help your children or grandchildren financially?
- Give more to charity?
- Leave a legacy?
Your financial strategy should support those priorities. If your goals have changed, your plan may need to change with them.
Stress-test your assumptions. A retirement plan should account for more than one possible future. Consider how your finances would hold up under different circumstances:
- What if tax rules change after 2028?
- What if Social Security benefits are reduced in the 2030s?
- What if Medicare premiums and healthcare costs increase faster than expected?
- What if the stock market experiences a significant decline?
And lastly, remember: When in doubt, zoom out!
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