A change in presidential economic policy generates curiosity and concern about the direction and flow of interest rates or which economic sectors could flourish under the upcoming administration.
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“As advisors, we train our clients to think long-term and expect the historic volatility associated with investing in the stock market,” said Stuart A. Schiffman, founder and managing partner of Compound Wealth Advisors. “But we don’t prepare them for ‘black swan’ events. We could be poised to experience something out of the historical norm.”
As the Trump economy begins, here are four money moves retirees should make before Inauguration Day.
The Tax Cuts and Jobs Act, which President-elect Trump signed during his first term in 2017, was set to expire in 2026. However, Trump said during this year’s presidential campaign that he would extend the legislation, which would lower tax rates.
“What this means for retirees is that the tax-deferred dollars they are living on will last them longer than if the government taxed it at higher levels,” said Joe Schmitz Jr., founder and CEO of Peak retirement Planning. “Additionally, with the standard deduction being double what it was in 2017, less of our income is taxable under the legislation.”
If you still have some income — like from a part time job or side gig — Schmitz recommended contributing to a Roth IRA. The contribution limit is $8,000 for those age 50 and older.
“This is an opportunity to take advantage of tax-free growth opportunities, which will lessen your tax burden,” Schmitz said. “If you have tax-deferred retirement accounts, it may make sense to work with a financial advisor and begin doing some Roth conversions in order to pay taxes now and [take] advantage of tax-free growth from that point forward.”
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Trump proposed imposing at least a 10% universal baseline tariff on imports during his second term. According to the nonpartisan Tax Foundation, a 10% universal tariff would increase taxes on American households by an average of $1,253.
“Tariffs typically drive up the cost of goods and services,” said Paul Tyler, host of “That Annuity Show.” “This could have a meaningful daily impact for retirees living on a fixed income. The best approach right now is to tighten the belt and conserve precious savings.”
