Throughout 2024, talk of the election dominated public and private discourse. In most election years, once the country casts its ballots, politics fades into the background of our collective consciousness. That hasn’t happened this time around. The re-election of Donald Trump to the presidency was polarizing — people on both sides of the political fence still have politics at the forefront of their minds.
It’s no different in financial planning circles. Clients regularly ask their advisers, “What should I do with my money now that Trump is going to be president again?” It’s an understandable question, especially given the president-elect’s stated intention to implement radically different economic policies from his predecessor. However, it’s also a shortsighted question.
You need to focus way beyond just the next four years
Americans choose a president every four years, and many people view finance in the same four-year terms. The election of a new president inevitably causes retirement savers to assume they need to make changes in order to react to the new administration’s economic impacts. But for financial planners, four years represents very short-term planning.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
When helping my clients develop a retirement strategy, I plan for the next 30 years at minimum. It’s possible to have seven different presidents in that time! Predicting presidential policies three decades in the future is impossible. That’s why it’s better to plan for what we can reasonably predict is likely regardless of who sits in the Oval Office.
Take a long-term look at taxes
One such prediction is taxes. Much has been written on Trump’s tax plans. But it helps to take a wider view. While the Republican sweep of the presidency and both houses of Congress means it’s much less likely the Tax Cuts and Jobs Act will sunset at the end of 2025 as most assumed it would, it’s nonetheless seemingly inevitable that at some point, taxes will increase.
Planning for that eventuality is therefore crucial: Is it better to defer taxes via 401(k)s and IRAs today, risking having to pay higher tax rates in the future, or should you consider converting tax-deferred savings vehicles to their Roth equivalents? The tax bill will be due today, but you’ll avoid potentially higher tax rates in the future.
How about inflation?
Politics distracts from another area of importance as well: Everyone’s still talking about the election, but few are talking about inflation. Some economists worry that Trump’s plans to impose heavy tariffs on imported goods will cause inflation to rise. That’s concerning but, as we recently saw, inflation is a possibility regardless of tariffs. Only planning for inflation when you think a president is about to cause it is riskier than planning for inflation as a matter of course.
It’s a safe assumption that prices will be higher in 30 years than they are today. This means your retirement savings must hedge against inflation; low-interest savings accounts lose value as costs rise, whereas investments with a rate of return higher than inflation gain value.
The bottom line
It’s tempting to focus on immediate and short-term events when considering how to address your finances, but for successful retirement planning, a longer view is necessary. Your financial adviser can help you develop a financial plan designed to weather unpredictable economic events far in the future that could otherwise jeopardize your retirement.
Related Content
- Worried Your Heirs Will Blow Their Inheritance? Make a Plan
- Trump's Stances on Social Security and Medicare
- 10 Predictions for 2025 from The Kiplinger Letter
- Three Possible Tax Impacts for Retirees Under Trump
- How to Fight Inflation's Hidden Threat to Your Savings
-
USPS Is Raising Prices for Holiday Shipping: Dates and Increases You Need to KnowWhat the USPS's $16 price hike means for your wallet and your small business.
-
July CPI Report Ignites a Risk-On Rally: Stock Market TodayMarket participants price out worst-case scenarios for tariffs and inflation and will now turn their attention to employment and growth.
-
USPS Is Raising Prices for Holiday Shipping: Dates and Increases You Need to Know
What the USPS's $16 price hike means for your wallet and your small business.
-
July CPI Report Ignites a Risk-On Rally: Stock Market Today
Market participants price out worst-case scenarios for tariffs and inflation and will now turn their attention to employment and growth.
-
July CPI Report Boosts Rate-Cut Odds: What the Experts SayThe July CPI report shows that tariffs are having a slight impact on inflation, though not enough to keep the Fed from cutting interest rates.
-
Don't Be a '98 Pound Weakling' Just Because You're AgingCharles Atlas's tips to the '98-pound weakling' might be the only comic book ads that actually paid off. Swap the X-ray glasses for this healthy habit.
-
For Savers Who Hate Surprises, This Strategy DeliversThis approach gives you peace of mind, regardless of whether rate cuts happen.
-
DST Exit Strategies: An Expert Guide to What Happens When the Trust SellsUnderstanding the endgame: How Delaware statutory trust dispositions work, what investors can expect and why the exit is probably more important than the entrance.
-
Think Selling Your Home 'As Is' Means You'll Have No Worries? Think AgainThere are significant risks and legal obligations involved in selling a home 'as is' and by yourself, without a real estate agent.
-
Stocks Slip Ahead of July CPI Report: Stock Market TodayThe latest inflation updates roll in this week and Wall Street is watching to see how much of an impact tariffs are having on cost pressures.
