Uncertainty reigns supreme today, whether it's in government, the markets or the economy. President Donald Trump governs by keeping adversaries on their heels, both in the U.S. and abroad. He creates chaos and uncertainty.
Those who love him are comfortable. Those who dislike him are fearful. A large group in the middle is just nervous. And for good reason, right?
Uncertainty is the norm, and that will likely be the case throughout his term. Trump’s many controversial actions and numerous economic issues, like tariffs and taxes, are constantly on everyone’s mind.
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But the quicker people get their heads around the reality that the mood of the moment is not going to change anytime soon, the better off they will be. Here's the problem: People get stuck in a wait-and-see mode when it comes to their financial planning.
Like presidents, tariffs come and go. Policy changes also shift about every two years with the election cycle, first with midterms, followed two years later by another presidential election.
But waiting to see what will happen is not a strategy. Doing so is falling prey to uncertainty instead of living with purpose and direction.
The more you let uncertainty paralyze you, the less confidence you have, the more fearful you tend to become and the shakier your decisions can be. And the longer you wait, the more you might miss opportunities that could benefit your financial future.
Tune out the noise, move forward strategically
The tariff headlines and economic concerns have taken their toll on the market. But it's really just noise. Here's the reality: If you are in Save Mode (saving for retirement), then market pullbacks, corrections and even downturns can be opportunities.
If you’re in Retirement Mode, you should be ready for these moments because they come frequently:
- A 5% to 10% move to the downside can happen every year
- A 10% to 20% decline certainly can happen every two to four years
- A 30% or more drop is possible every five to seven years
- A 50% correction or market crash can occur every 10 years
These are just broad estimates, and it should be noted that two 50%-plus corrections happened twice within 10 years between the years 2000 and 2010.
Therefore, you should move forward strategically with those things in mind. Market crash-test your retirement investment plan and market crash-test your income plan for retirement.
Make your income in retirement as predictable as possible, your investments in retirement as boring as possible and your lifestyle as exciting as possible.
Those who are in Save Mode can take a different approach. When the market's down, you buy — keep investing in your retirement accounts and adding to them.
If you build a strategic plan for retirement, you can craft a plan that's predictable and one that can also take advantage of market downturns. The whole point is to move forward with confidence, recognizing market corrections and crashes do and will happen before and during retirement.
Creating a customized plan that takes market realities into account can get you off the stock market roller-coaster ride and prevent you from allowing the noise and media headlines to govern your decisions.
Don’t let the mood for the day set your mood for the day.
Take advantage of low tax rates
Retirement is less about your net worth and more about net income. Once you create a retirement net worth, you need to set up a net income plan. Do you simply have investments or an income plan from your investments after taxes?
Or, even better, a plan that minimizes taxes and insulates your money from future taxes and tax increases?
Here's what I know: Our national debt is over $36 trillion. It rises by $1 trillion every 100 days. Our interest on debt is spiraling out of control, and government spending is almost uncontainable and certainly unsustainable.
The last time we were at more than 100% of debt-to-GDP ratio, we were coming out of World War II. In 1944, the top tax rate hit 94%.
The way the government solves a spending problem, a debt-crisis problem, is to raise taxes. Will it do that this year? Will it do it next year? Will it take government leaders five or 10 years before they figure it out?
I don't know. But you should be ready for increasing tax rates if your retirement is going to last a decade or more.
From the beginning of the Baby Boomers’ working years, they were told to defer their money and savings because they were going to be at a lower tax rate in retirement.
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Right now, you are most likely in the lowest tax rate you're going to see during your lifetime. If Congress extends the Tax Cuts and Jobs Act (TCJA), which is set to expire at the end of 2025, there will continue to be golden opportunities to insulate your money and your lifestyle from future taxes and tax increases.
Whether it's for you or for your family, protect your money from the biggest villain — taxes. And if you can, disinherit the most unwanted member of your family, Uncle Sam.
Live with confidence
To get your retirement right, remove the noise, take control of what you can control and step out of the uncertainty and into certainty.
Build an income plan that works for you around your money, around your investments and around your future.
Build an investment plan, build an income plan and build a tax plan around the things you can control right now.
When you do that, you can live with increased confidence. You can also remove the tendency to wait to see what happens, which would potentially cause you to miss out on opportunities and possibly cost you money down the road.
Instead, step into a life of freedom and confidence — no matter what comes of tariffs or taxes.
Dan Dunkin contributed to this article.
This appearance in Kiplinger was obtained through a public relations program. The columnist received assistance from a public relations firm in preparing this piece for submission to Kiplinger.com. Kiplinger was not compensated in any way.
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