President Donald Trump made a variety of economic policy promises on his campaign trail, many of which could affect those in retirement or soon to retire.
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A change of administrations alone can cause economic anxiety, but with Trump seemingly partnering with billionaire Elon Musk for a Department of Government Efficiency (DOGE) to root out wasteful government spending, many are concerned that important programs like Social Security and Medicare, among others, could get gutted.
Financial experts suggested issues that retirees should pay attention to as the second Trump economy begins and those they can put aside.
The Effects of Cutting Government Spending on Retirement Accounts
Reduced government spending, in the way that Trump and Musk’s DOGE is planning, could be beneficial to the economy over time, according to Barry Spencer, financial advisor at Wealth With No Regrets, as government spending “is out of control” and needs some significant changes.
That said, if the Trump administration takes an approach he likens to “ripping off a bandaid” — making a lot of swift, dramatic changes — that could have a negative impact on the economy.
“It could send unemployment up, it could send productivity of the economy down and it could take the stock market in uncertain directions and drive it really low. So you could have a reversal of all the gains we’ve had,” Spencer said.
This could hit soon-to-be retirees hard, forcing them to delay retirement. He suggested that if your retirement is in good shape now, and you were planning to wait to retire, it might be time to “lock in some gains” by retiring sooner than later.
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Consider the Impacts of Deregulation
If Trump continues to reduce governmental red tape, which Paul S. Stanley, CFP and managing partner at Granite Bay Wealth Management, thinks will likely be a priority in his second term, deregulation could potentially benefit many stock market sectors, leading to increased business spending and investment in new technologies.
“However, be wary of unintended consequences that may have a long-term impact on the economy,” Stanley said. “For instance, some experts say the 2007 housing crisis began with deregulation in the ’70s and ’80s.”
Understand Estate Tax Changes
Before Trump’s election win, many families were trying to optimize their estate plans ahead of the scheduled sunset (2025) of the tax cuts that were part of the 2017 Tax Cuts and Jobs Act, Stanley said.
“The sunsetting of that plan is now ambiguous, meaning people will, once again, need to revisit their estate plans,” he said.
However, Trump has signaled that he wants to reinstate or maintain his tax cuts, which may keep things as they are.
The Effects of Tariffs on Costs
Probably one of the most talked about Trump policy proposals is increased tariffs on goods imported into the U.S., which is likely to drive up the prices of those goods and services.
Spencer said there can be some upsides to increased tariffs, too. He said, “Your productivity goes up as companies are forced to be more productive because competition goes up. And so when they do that, the people can do more, the business can produce more, which drives costs down.”
However, he did say there’s no way to gauge the timetable of when the benefits of tariff-induced productivity would be seen.
Additionally, Stanley said that Trump’s implementation of tariffs could help boost other market segments. “Expect to see a broadening out of stock returns with mid cap and smaller cap stock benefiting from Trump’s ‘America First’ policies.”
Social Security Changes
Social Security is a big concern for retirees. However Spencer said that anyone currently receiving benefits — largely boomers — should not worry. “There’s no way on God’s green Earth, a Republican or a Democrat are going to take away Social Security benefits from a baby boom generation of over 80 million voters that actually votes. That’s insanity.”
It’s Gen Xers and younger who are more likely to face receiving less than 100% of their benefits or who may have to retire later in order to get full benefits.
Stay Focused on Long-Term Financial Goals
While it’s understandable to be nervous, Stanley suggested, “Most presidents have ambitious agendas and rarely accomplish everything they promise in their campaigns. Therefore, don’t overreact to every soundbite.”
Instead, stay focused on your own long-term financial goals and don’t let the “noise distract you from following your thoughtful financial plan,” he said.
The Economy Is Resilient
History has shown that markets tend to rise over time, regardless of who is in office, Stanley said.
“Don’t make any rash decisions based on media headlines. The worst thing you can do for your financial future is stop following a well thought out financial plan because of a temporary policy shift in Washington.”
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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This article originally appeared on GOBankingRates.com: 7 Things Retirees Should Be Paying Attention to as the Trump Economy Begins
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