The 2024 elections are just around the corner. It’s one of the most contentious campaigns in recent memory. For retirees, the election outcome could have major implications.
A looming Social Security shortfall could lead to significant cuts in benefits. The president elected this year will help shape how the program is funded and whether benefits are amended. Social Security is only one issue impacting retirement planning.
“The 2024 election is going to be critical for retirees,” says Brandon Ashton, director of retirement security at Cornerstone Financial Services in Southfield, Michigan. “Tax legislation, pension reforms, raising the retirement age, required minimum distribution age adjustments, healthcare costs, and more are at stake.”
Experts suggest those planning for retirement should stay updated on any changes and how these might affect their plans. Here are five key areas to watch as the election unfolds and how to prepare — no matter who wins.
Social Security provides a substantial portion of income for America’s retirees. But with the program’s trust fund running low, analysts expect benefits could be cut by 2033 if the funding situation isn’t resolved. The average check could be automatically cut by around 21%, according to NPR.
This would significantly impact retirees. “Whoever wins the presidency will set the tone for the future of Social Security,” says Ashton. However, Congress is ultimately responsible for making any funding changes.
Some senators have discussed raising the full retirement age, cutting benefits, or eliminating measures that help Social Security’s payments keep up with inflation. What you can do: Save and invest more toward your own retirement. Potential benefit reductions mean soon-to-be retirees should consider financial moves that allow them to fund more of their retirement independently.
With several years until potential cuts, making substantial changes now can help bolster future finances. The expiration of the 2017 Tax Cuts and Jobs Act — informally known as the “Trump tax cuts” — will be one of the most contentious issues. The law is set to expire at the end of 2025.
Congress will need to act to renew it or revert to pre-2017 tax structures. Both candidates have proposed various tax system adjustments. Harris has proposed raising the top tax rate from 37% to 39.6%, but not raising taxes on households earning $400,000 or less.
She also proposed a minimum 25% tax on households with more than $100 million in assets.
How elections shape retirement planning
Trump has said he would extend the current tax provisions, lower corporate tax rates, and implement an across-the-board tariff on all imports.
What you can do: Take tax planning seriously. Smart planning can minimize the taxes you have to pay. Retirees have some control over their income, and therefore, taxes, by adjusting how much money comes out of their retirement accounts as income.
A potential rise in tax rates may mean that now is an opportune time to take advantage of converting a traditional retirement plan such as an IRA or 401(k) into a Roth IRA. This strategy can offer a range of benefits. “If you believe the Trump tax cuts are going to expire, why not take advantage of them while you still can?” says Primavera.
A Roth conversion is a great strategy in retirement planning.”
What you can do: Consider a Roth IRA conversion. While there’s no guarantee on future tax structures, retirement advisors often suggest considering a Roth IRA conversion, especially if you have many years left in retirement. “Regarding the Trump tax cuts that are expected to expire at the end of 2025, the biggest change would be the estate tax reduction,” says Steve Azoury, ChFC, owner of Azoury Financial in Troy, Michigan.
Currently, Americans can give away $13.61 million without paying any estate taxes. If estate tax laws revert to the prior system, this amount will drop. Any money given above the threshold will be taxed at high rates.
What you can do: Keep an eye out. You’ll have some time to see direction on this issue. However, given the potential tax savings under the current system, it could be wise to speak with your advisor about your personal situation.
You might be tempted to abandon your investment and retirement plan if your preferred candidate doesn’t win. But experts advise against it. “Elections are always interesting.
Everyone has an opinion, but this should not change your retirement goals,” says Azoury. “The one thing you should avoid doing is selling all investments and moving to cash,” says Primavera. If you need to reduce risk, do so methodically.
What you can do: Stick to the investment plan that meets your long-term goals. Make changes thoughtfully rather than reactively. By staying informed and proactive, retirees can better navigate changes stemming from the 2024 election while securing their financial future.
