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President Donald Trump is back in the White House and he’s sure to bring change with him. If you’re retired or you’re about to retire, you might be wondering: will these changes affect your nest egg? And if so, how?
Here’s what financial experts say could change for retirees in 2025.
Social Security Changes
According to the Social Security Administration, about 40% of retirees pay federal income tax on the benefits they receive each month. “Seniors should not pay tax on Social Security,” Trump said during his campaign. He promised to eliminate these taxes. This might be the biggest potential shake-up imminently facing retirees.
Experts warn this change could have unintended consequences. Eliminating taxes on Social Security benefits could give more money to retirees in the short term, that’s true, but it might lead to long-term damage. An analysis from the Tax Foundation suggests this could speed up the Social Security trust fund’s depletion date, by two whole years — from 2035 to 2033.
Interest Rates
Trump has stated he wants to influence Federal Reserve policy, so he could push to lower interest rates and then keep them low. Thomas Brock, chartered financial analyst (CFA) and expert at Annuity.org, has overseen multi-billion-dollar portfolios. Right now, he’s predicting lower interest rates ahead.
These low rates could benefit you — if you’re in debt. But it could also impact returns on your investments, like savings accounts and bonds. With interest rates low, you’d earn less money overall.
Tax Cuts
During his first term, Trump passed the Tax Cuts and Jobs Act (TCJA). This was intended to stimulate economic growth, by lowering taxes for individuals in the highest tax bracket. Currently, the act is set to expire this year. But Trump could extend these cuts or even try to make the TCJA permanent.
If you’re a retiree and you’re in a higher bracket, this could be a welcome change. You’d enjoy lower taxes as well as higher estate tax exemptions. Ultimately, you’d have more disposable income.
Thanks!
Healthcare Changes
Trump has said that he won’t cut funding to Medicare. But during his campaign, he also indicated plans to overhaul healthcare. This might mean, for example, changes to what Medicare covers or doesn’t cover. If there’s a procedure you’ve been putting off, you may want to schedule it now, while you know what it costs.
And if you’ve retired early, you may be relying on the Affordable Care Act until you become eligible for Medicare. Trump’s administration could make big changes to the ACA as well.
Market Implications
Brock explained that he anticipates “higher stock market values” under Trump. But, regardless of who’s in office, make sure your portfolio is diversified. Depending on Trump’s policies, some assets might perform differently than others. That’s why it’s always important not to put all your eggs in one basket.
Editor’s note on political 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.
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