It's still early in President Donald Trump’s second term, but his new economic policies are already having an impact on Americans’ retirement nest eggs.
The passage of the president’s “One Big Beautiful Bill,” an executive order paving the way for 401(k) plans to include private investments and cryptocurrencies, will have dollars-and-cents implications for retirement savers of all ages. Uncertainty about the economic impact of tariffs on U.S. trading partners will also be a factor.
If you’re a retiree or have a 401(k) or IRA retirement account, and you’re wondering what it all means for your bottom line, you’re not alone. Trump has moved swiftly to turn campaign proposals into law, and as a result, whatever your age, your retirement planning strategy might need a rethink.
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Trump’s impact is already being felt on Wall Street, which has pushed the benchmark S&P 500 stock index to record highs this summer as it reacts to the new laws and policies, resulting in more clarity and less uncertainty.
The rally erased the market’s 10%-plus drop in March, which was largely due to confusion surrounding the implementation of Trump’s tariff plans and concerns that Trump’s 2017 tax cuts would not be extended.
While not all tariff-related question marks are answered, the July 4 passage of Trump’s tax-and-spending bill, which made the tax brackets and rates established by the Tax Cuts and Jobs Act of 2017 (TCJA) permanent, means there are fewer unknowns for Wall Street to fret about.
The Trump administration, however, hasn't taken steps to shore up Social Security, which means American workers could see a cut in benefits starting in 2033.
Since we’re less than a year into Trump 2.0, it’s still too early to know for sure how your finances will be affected in the long term.
For example, it's hard to know how Trump's tariffs will impact inflation, which eats into Americans’ purchasing power and crimps cash flow. For now, tariffs have yet to feed into consumer prices in a major way. July consumer price inflation (CPI) came in at 2.7% vs a year ago, a tad lower than analysts’ expectations.
Economists warn that higher prices are likely as companies are forced to pass higher costs to consumers.
To help pay for tax cuts, Trump plans to boost revenue with his pro-growth policies and tariffs on foreign-made goods entering the U.S. The president has already sealed tariff deals with some trading partners, imposed higher levies on others, and delayed others.
The uncertainty of the impact of tariffs on consumers, as well as companies and sectors of the economy, has Wall Street concerned about a recession. In June, Goldman Sachs said there’s a 30% chance of an economic downturn in the next 12 months, down from its previous estimate of 35%.
It’s important to note that while presidential policies can move the economic needle, the president can't exert control over all the levers that drive the economy and financial markets.
“The economic trends and forces that are in place are far more powerful than presidential policies,” says Ross Mayfield, investment strategist at Baird Private Wealth Management.
How Trump could change your retirement
Still, there's no doubt, Trump’s policies can have an impact — both positive and negative — on the nation’s retirement readiness.
Here are eight ways Trump could change your retirement.
1. Lower taxes means more money to spend and save
The One Big Beautiful Bill (OBBB) extension of the Tax Cuts & Jobs Act (TCJA), originally set to expire at the end of 2025, means Americans can avoid paying higher taxes and seeing their paychecks shrink. (If the TCJA had been allowed to sunset, tax rates would have reverted to higher rates before the legislation was passed.)
The extension of TCJA is a tailwind for spending.
“Fewer taxes mean more money in your pocket,” says Chris Mediate, president of Mediate Financial Services. “This could enhance retirement savings, as retirement is always about the money you can keep from your income.”
Those are pluses for retirees on fixed incomes and pre-retirees still in the asset accumulation stage.
Making the 2017 tax law permanent also means that people have a longer runway to take advantage of the lower tax brackets, says Rachele Tubonganua, a private wealth adviser at U.S. Bank. One strategy to consider is converting traditional 401(k) or IRA dollars into a Roth IRA, which allows for tax-free withdrawals.
A similar option is to convert a traditional 401(k) into a Roth 401(k). The time is right now because with tax rates low, you’ll pay less taxes on the dollar amount you convert to a Roth account.
“The narrative is to really minimize taxes in the future (when they are likely to be higher),” says Tubonganua. “You want to take advantage of opportunities that are available to you right now.”
2. Social Security: Angst about customer service now and potential cuts in the future
While Trump vows to fight to protect Social Security, his administration has not taken any direct measures to shore up the financially troubled benefit program.
Trump has repeatedly said that he “will not cut Social Security” but is focused on eliminating “waste and fraud” to help keep it solvent. In the short run, that’s a plus, as those receiving Social Security checks can continue to count on 100% of their benefits.
“I don’t think people have to worry about their checks,” says Mayfield.
Still, Trump has taken steps to lower Social Security costs by trimming its employee count and temporarily closing field offices. That’s raising red flags from critics who argue beneficiaries will face added delays and longer wait times on hold to speak with a Social Security representative.
“In terms of apprehension and worry, at the top of the list is a breakdown in timely service delivery,” says Richard Fiesta, executive director of the Alliance for Retired Americans.
Former Social Security Administration commissioner Martin O’Malley has publicly warned of an “interruption in benefits” due to system outages caused by the firing of experienced employees who know the system well.
Trump's proposal to end taxes on Social Security benefits did not come to fruition. Depending on a retiree’s income, up to 85% of benefits could be subject to taxes under current law.
What the OBBB did offer, however, was a $6,000 tax deduction for those 65 years of age or older on top of the standard deduction. This extra deduction is designed to lower a retiree's taxable income and, therefore, the amount of tax owed. It expires after 2028 and is subject to income thresholds.
However, the high cost of tax cuts in the OBBB and the resulting increase in the nation’s deficit could put Social Security on even shakier ground.
The new senior tax deduction means less revenue to cover future Social Security benefits. That deduction is one of several provisions of the new tax-and-spending bill that will hurt the solvency of the Social Security and Medicare trust funds, according to the nonpartisan Center for Budget and Policy.
There’s a risk that it will accelerate the timetable when full benefits won't be paid, as Trump’s current policies don’t offer fixes to address Social Security’s weakening financial position.
Currently, Social Security recipients can expect to get 100% of their benefits through 2033. However, after that, unless Congress takes steps to shore up Social Security, the trust fund will be depleted, and the government will only be able to pay 77% of earned benefits thanks to ongoing Social Security payroll deductions from working Americans.
“In 10 years, checks will be cut by 21%, and nobody wants to see that happen,” said Lindsay Theodore, thought leadership senior manager at T. Rowe Price. “That’s a big concern that we’re watching closely.”
Despite the uncertainty about the solvency of Social Security, “there haven’t been any real credible threats, at least as of now, targeting actual benefits,” says Matthew Allen, co-founder and CEO of Social Security Advisors, a firm that advises Americans on claiming strategies.
T. Rowe Price's Theodore still advises people to take Social Security later to lock in a larger lifetime benefit rather than panicking and taking benefits earlier at a reduced rate. “It’s about a 70% difference between your (benefit) paycheck at 62 vs waiting until age 70,” said Theodore.
3. How corporate tax incentives could lift your 401(k)
Trump's push to lower the corporate tax rate from 21% to 15% didn't happen. But the OBBB did include a host of tax incentives for businesses to boost growth. The dollars that corporations avoid in taxes go right to their bottom line, which boosts their profitability, and corporate earnings are a key driver of stock prices.
Retirement savers who own stocks could see the value of their holdings in their 401(k) plans rise, says Baird’s Mayfield. Similarly, Trump’s push to reduce regulations on businesses to boost animal spirits, he says, bodes well for stock investors. “They are all tailwinds for corporate profitability,” says Mayfield.
Adds Mediate: “When markets perform well, many retirement challenges are mitigated.”
On the negative side, however, inflation and interest rates could rise if Trump’s policies stoke too much growth. That one-two punch could cause both the stock and bond markets to fall in value, reducing retirement account balances.
Signs of slowing job growth and tamer inflation recently, however, appear to be setting the stage for Federal Reserve rate cuts, which would be welcomed by both equity and bond investors.
Theodore says an active management approach to investing could outperform during Trump’s second term.
Portfolio managers are more nimble and can move more money into stock in sectors of the economy that will benefit from the president’s policies, such as manufacturing companies, and allocate less capital to sectors that will suffer, such as electric car makers and renewable energy, which analysts say will be hurt by cuts to tax credits that offset the cost of buying an EV or solar panels for a home.
4. Trump paves way for inclusion of alternative assets in employer-sponsored retirement accounts
In late August, Trump signed an executive order that opens the door to adding alternative assets, such as private equity, private credit, and cryptocurrencies such as bitcoin, to 401(k) plans.
These assets, which have traditionally only been available to high-net-worth investors and large institutions such as pension funds, are now accessible to a broader range of investors.
Private-equity investments will be allowed in employer-sponsored retirement accounts via target-date funds and other types of so-called managed accounts administered by investment pros.
Private-equity investments, which differ from publicly owned companies that trade on the New York Stock Exchange or Nasdaq, tend to be less liquid (code word for not as easy to sell), are more difficult to value, and charge higher fees, says Thomas Racca, manager of the personal finance team at Navy Federal Credit Union.
However, since retirement accounts are long-term investments, proponents of private equity say it could add more diversification and upside potential to retirement accounts.
Still, given the lack of liquidity and higher fees for private assets, retirement savers “would likely want to limit exposure to a modest portion of their total portfolio,” Racca said.
Given that the number of publicly traded stocks has declined from 7,300 in 1996 to roughly 4,300 today, according to EQT, a global investment company, adding privately owned companies to 401(k) plans provides investors with a larger pool of assets to invest in.
“Over 99% of American businesses are private, and these investments allow people to participate in a much broader universe of opportunities,” says Michael Weisz, founder and CEO of Yieldstreet, an alternative investments platform.
Moreover, a 2023 study by Georgetown University’s Center for Retirement Initiatives (PDF) found that substituting a 10% private equity stake for publicly traded stocks in a portfolio netted a better median return of 0.22% per year and produced positive outcomes 80% of the time.
Trump’s move to clear the way for digital assets to be included in 401(k) plans democratizes investing, says Ben Weiss, CEO of CoinFlip, a digital asset platform. “It represents a significant step toward making digital assets more accessible to everyday Americans and signals that cryptocurrencies are increasingly being recognized as part of the broader investment landscape.”
Cryptocurrencies come with risks, of course, and have historically been very volatile investments, experts note.
In the bigger picture, Trump’s executive order gives 401(k) investors a larger menu of investments from which to choose.
“I’m a big advocate for giving people options,” said Taylor Davis, a wealth management adviser at Meridian Wealth Management. Having the option to invest in private companies means investors can diversify away from the S&P 500, which is currently driven by a handful of megacap companies such as Nvidia and Microsoft.
“You can invest alongside private equity companies who are rolling up (e.g., acquiring multiple companies), HVAC companies, dental practices, or construction companies,” said Davis.
Still, the added complexity of private equity and digital currencies means there will be a steep learning curve for investors, Davis says. Investing in these new asset classes might not be for everybody, he adds.
“The way I think about is, it’s kind of like having access to a Corvette or Formula 1 car,” said Davis. “It can go fast, but in the wrong hands with the wrong level of skill and experience, it may not turn out so good.”
5. Tariffs could feed inflation, hurting Americans’ purchasing power
Trump's tax cuts will rely on revenue from a controversial source: tariffs.
Tariffs, however, could have an unintended consequence: They could cause inflation or increase consumer prices. So far, Trump’s trade war with U.S. trading partners has not fed inflation in a major way, although many economists believe higher prices are on the horizon. The CPI’s 2.7% year-over-year rise in July is still above the Fed’s preferred 2% target.
Persistent inflation could put a dent in retirees' and working Americans' purchasing power.
“The costs of tariffs will be passed on to the end consumer, so it ends up being somewhat of a sales tax,” says Theodore. “The dollar might not go as far for retirees on a fixed income." Prices for cars, dishwashers and vegetables have already risen.
A return to inflationary times would be a negative for all Americans, who are still hurting from the post-Covid spike in inflation that peaked at 9.1% in 2022, its highest level since 1981. Tariffs imposed by Trump in his first term as president also acted as a headwind for stocks, adds Mayfield.
Tariffs would also hit the economies of some states especially hard, particularly those in the Midwest and South.
6. Health care costs could rise
Trump’s OBBB has more than $1 trillion in cuts to health care programs in the next 10 years, according to Chartis, a health care advisory firm. The bill made deep cuts ($900 billion) to Medicaid, the health insurance program for low-income Americans.
The cuts, along with new work requirements to be eligible for benefits, could cause millions to lose coverage. The Congressional Budget Office (CBO) estimates that 16 million people will lose insurance coverage due to impacts from the bill.
The new tax-and-spending bill also includes changes that could restrict enrollment in the insurance marketplace created by the Affordable Care Act. The July 4 bill could also increase premiums for so-called Obamacare plan participants, as the bill will allow premium tax credits, or subsidies, to expire.
The new bill terminates Medicare for many documented immigrants who have worked in the U.S. and paid into Medicare, according to Chartis. The bill also increases the number of drugs for rare diseases that are exempt from Medicare price negotiations.
T. Rowe Price's Theodore advises clients to watch these developments closely, as they can have a huge impact on the affordability of health care.
“Health care is a big question mark,” says Patti Brennan, CEO of Key Financial. “It’s probably safe to assume those costs will increase for most people who are retired.”
7. Deportation of immigrants could have negative effects
Many of the undocumented immigrants that Trump is deporting earn and spend money in the economy and are key sources of labor in agriculture, housing and other service industries, Theodore notes.
One potential downside is higher prices for fruits and vegetables, pinching the budgets of retirees and other Americans.
What’s more, higher prices for building materials are resulting in higher costs for new home construction and home renovations. In addition, increased deportations could lead to higher construction labor costs if the supply of workers shrinks.
For retirees needing hired caregivers, Trump's policies to end some programs for legal immigration could reduce the number of home health care workers.
8. Market volatility could rise
With the endgame to Trump’s tariff policies still unclear, investor uncertainty could persist, leading to elevated financial market volatility, witnessed by the stock market’s first correction since 2023 earlier this spring.
While the S&P 500 has rebounded and gone on to new highs, there’s no saying investors won’t retreat if economic data starts to weaken in the face of tariff headwinds.
If stock and bond prices suffer steep, lasting price corrections, retirement savers and retirees must ensure they have solid financial plans that allow them to ride out the storm. Getting spooked and making poor financial decisions due to fear will only make matters worse.
“The market prefers stability, right?” says Tim Steffen, director of advanced planning at Baird. “It likes certainty.” Investors and retirees must not get caught up in the noise, says Steffen. “Don’t make long-term bets based on the latest proposal or talking point or tweet,” he says.
Keep calm and carry on
Despite all the different ways that Trump 2.0 could impact your money and retirement, the best advice is to stay the course and keep executing your financial plan, says Tubonganua.
“Focus on your long-term plan and goals and objectives,” says Tubonganua. “Tweak it (your plan) here and there if needed once policies do come into play and impact your finances.”
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