Well, it’s probably no surprise that the question I’m being asked right now is “Ryan, what will President Trump mean to my retirement?”
And that’s a very good question. However…
For all the debates, campaign speeches, and around-the-clock coverage – neither candidate had much to say about what their presidencies would mean to the future of retirement.
With over 76 million Baby Boomers nearing or already in retirement, that’s surprising. The debates seemed to dance around the question of retirement security for these Americans.
So, at this point, all that we have to go on are a few campaign promises. And it’s too early to say just yet whether or not these promises will become law.
Trump on taxes
Donald Trump campaigned on the most aggressive tax reform since Ronald Reagan. According to the Tax Policy Center, Trump has proposed cutting taxes by $6.2 trillion over 10 years. That is huge. But who does it benefit?
While there are some quirks needing worked out in his plan, these cuts should benefit all income groups. On his official website, Trump writes that he will reduce the current seven-bracket income table into three taxable groups:
Trump has also proposed increasing standard deductions for joint filers from $12,600 to $30,000, while capping itemized deductions at $200,000. Single filers will be allowed $15,000 and $100,000 respectively.
On the other hand, no one has been clear on how we’ll pay for these cuts. Some economists believe Trump’s tax policy could add trillions to our national debt. With the national debt racing toward $20 trillion, it’s difficult to imagine adding more.
But Trump claims his plans for bolstering the economy – e.g. adding 25 million new jobs, increasing exports, and growing the GDP by 4% annually – will pay for these cuts and add new federal revenues.
On the other hand, those are some really optimistic goals. In an interview with CNN, Warren Buffett said that while he believes the markets will do well, he feels Trump’s plans for economic growth are a little unrealistic.
Trump on entitlement programs
Throughout his campaign, Trump promised Americans he would preserve Social Security and Medicare. “I will do everything within my power not to touch Social Security,” Trump said. But I don’t think we should sigh with relief just yet.
Speaker Paul Ryan (R-WI) and Senate Majority Leader Mitch McConnell (R-KY) have long wished to cut benefits, and now that their party has control of both the administration and legislation, Trump may find himself under a lot of pressure to play along.
Another interesting development is Trump’s choice of Michael Korbey to head the Social Security transition for his administration. Korbey is a long-time advocate for privatizing Social Security. This doesn’t mean Trump shares his ideas, but he hasn’t yet been clear on what steps he will take to save Social Security.
There’s also the question of Medicaid.
Los Angeles Times reported that over 70% of Californian voters supported Prop 52, which will make funding for Medi-Cal permanent. But the program could very well take a hit. In 2016, Medi-Cal received $4.4 billion in federal funds. And again, while Trump has promised to protect Medicaid for those who need it, Congress would like to impose a strict cap on federal spending for this program.
What should you be doing now?
Honestly, I can’t say for certain what a Trump administration will mean for your retirement. No one can at this point.
The best thing to do right now is to wait. Altering our retirement strategies right now for changes that may not even come could prove a costly mistake.
Even if drastic changes do come, these things don’t happen overnight. They take time – years, even – before the effects of reform are felt throughout the economy.
For now, we should take advantage of the retirement planning opportunities already available to us. If big changes come, there will be plenty of time to make adjustments.
Image Copyright: By stu99 / 123.com