Guille Briceno / imageSPACE / Shutterstock.com
Commitment to Our Readers
GOBankingRates’ editorial team is committed to bringing you unbiased reviews and information. We use data-driven methodologies to evaluate financial products and services – our reviews and ratings are not influenced by advertisers. You can read more about our editorial guidelines and our products and services review methodology.
20 Years
Helping You Live Richer
Trusted by
Millions of Readers
President-elect Donald Trump’s inauguration is just weeks away, signaling a change to economic policies that could affect your wallet and savings.
Financial experts are urging the middle class to take proactive steps to brace for anticipated economic shifts, potential tax cuts, trade policy changes, and market volatility.
As the Trump Economy begins, here are five money moves the middle class should make before Inauguration Day.
Reassess Your Investment Strategy
The middle class should review their retirement strategies before Inauguration Day, said Christopher Stroup, founder and president of Silicon Beach Financial.
“Increasing 401(k) contributions, maxing out IRAs or considering Roth options can help hedge against tax law changes,” Stroup said. “Rebalancing portfolios toward more resilient, long-term investments like index funds or dividend stocks can mitigate your risks from market volatility and tax policy changes.”
Mind Your Taxes
President-elect Trump promised to extend or make permanent individual and corporate tax breaks, which he enacted during his first term and are expected to expire a year from now.
Trump needs congressional approval by the end of the year to make good on his promise. Republicans typically favor lowering individual tax rates and increasing standard deductions. However, Congressional Republicans hold a slim majority and need to vote in lockstep to continue the middle-class tax breaks.
Financial experts advised clients to prepare as if the tax breaks would end in December 2025.
“With potential tax law changes, middle-class families can take advantage of tax-deferred accounts like 401(k)s or IRAs,” Stroup said. “Tax-efficient investments such as municipal bonds, charitable giving and managing capital gains, can also reduce taxable income. Consulting a tax profession for personalized strategies is highly recommended.”
Pay Down Your Mortgage
While Trump campaigned on lowering interest rates by implementing policies to reduce inflation, his pledge to impose tariffs, decrease tax rates and reduce business regulations could boost inflation and increase the nation’s debt.
“Trump’s fiscal policies can be expected to lead to rising and more unpredictable mortgage rates through the end of this year and into 2025,” Lisa Sturtevant, chief economist with Bright MLS, said in an interview with the Associated Press.
Thanks!
Stuart Schiffman, founder and managing partner at Compound Wealth Advisors, told GOBanking Rates that if the interest rates rise, debt service will increase on floating or variable-rate loans.
“It is best to pay these obligations down or convert them to fixed rates,” Schiffman said.
Prepare for Market Volatility
According to a recent U.S. Bank Asset Management report, “the stock market continued a bull run that began in October 2022, with investors anticipating policies that generally promote economic growth.”
However, the impact of Trump’s tariffs, taxes, and immigration could result in higher interest rates.
Melanie Musson, a finance expert with InsuranceProviders.com, said middle-class households should consider investing in certificates of depots (CDs) that provide money when they need it.
“Currently, CDs are providing decent interest rates,” Musson said. “If the economy improves and interest rates decrease, you can expect that CDs won’t be a great investment. But right now, when you put money into a CD, you know your interest rate, and it will not change.”
Review Your Health Insurance Plan
The middle class could change their health insurance plans.
During the campaign, Vice President-Elect J.D. Vance said that the new administration could let insurers categorize enrollees into different risk pools and offer plans based on potential health risks.
In light of possible healthcare changes, Stroup said families should review and adjust their health insurance plans, especially Health Savings Accounts (HSAs), because of their tax benefits and long-term savings.
“Additionally, setting aside a healthcare emergency fund, considering long-term care insurance and staying informed about potential changes in premiums can better prepare you for healthcare cost shifts in the future,” Stroup said.
Editor’s note on election 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.
Source link
