Complementary Booklet: Will the Presidential Election Results Impact Your Retirement?
Many people are wondering how the recent presidential election could affect saving and investing for retirement. A new administration means potential changes in policies and, thus, some changes in your financial planning. Should you adjust your investment strategy in response to the market swings that often follow an election? How are your taxes going to change? Will new laws affect your nest egg?
These questions come along with concerns about the ongoing coronavirus pandemic and ensuing economic fallout. While this time feels uncertain and has put many in a difficult financial position, it’s essential not to panic. Look at the big picture, think long term and seek out trusted advice from an experienced financial planner.
So what kind of changes can you expect because of the presidential results? How can you be proactive in helping protect your financial investments and savings in a new political landscape? Let’s take a look at some things you’ll want to consider as we forge ahead through these uncertain times.
What New Financial Policies May Be on the Way?
How might the new president’s policies affect your pocketbook, tax liability or retirement savings? Proposed changes include higher marginal tax rates, as well as increases in payroll taxes. The incoming Biden administration also hopes to incentivize 401(k) participation by lower- and middle-income earners, while reducing the tax benefit to those with higher incomes.1
Keep in mind that no president can accomplish all of their policy goals without the cooperation of Congress. The legislative process takes time, so any immediate impact to your investment strategy is likely to be minimal. And with a closely divided Congress, compromises will probably be necessary before any new policies can be enacted.
If higher tax rates should become more likely down the road, you may want to consider strategies for reducing your liability. A Roth IRA conversion, for example, could enable you to pay a lower tax rate today while your money grows tax-free for the future.2
Retirement Investing in an Uncertain Environment
Given the uncertainty over what may lie ahead with the stock market, new laws and a changing world, now is a good time to assess the level of risk in your current portfolio. How well are you able to tolerate a market correction, defined as a decline in value of 10% or more? How can you help protect your 401(k) in the case of a crash?
A good rule of thumb is to think long-term, rather than presidential term. The stock market has historically enjoyed a long track record of success, with corrections averaging about 14.6% since 1980.3 With positive years outweighing negative years, regardless of which party controls the White House, patience has been an asset for long-term investors.
When Are You Likely to Retire?
Before making changes to your investment strategy, think about how many years you have left until retirement.
If you plan to work a decade or longer, you may have more time to ride out any market corrections that occur. That may increase your risk tolerance. On the other hand, if you’re within 3 to 5 years of retirement, it may be wise to review your financial strategy and reassess how much risk you’re able to take on.
A well-constructed financial strategy can give you confidence no matter what the future holds. If you’re not sure how to get started, speak with a financial advisor for a complete retirement income analysis. Doing so will help you figure out how much you’re likely to need in retirement and set a road map to help you achieve your goals.
Need Help With Your Retirement and Investment Strategy?
For the last 20 years, The Resource Center has provided personalized financial planning services for lots of folks just like you. We continue to help our clients navigate through a host of economic and regulatory changes while saving and investing for the future.
We encourage you to fill out the form below to receive our complementary booklet entitled Will the Presidential Election Results Impact My Retirement? If you have questions about your retirement strategy, please reach out to us today to schedule an appointment.
Investment advisory services offered only by duly registered individuals through AE Wealth Management, LLC (AEWM). AEWM and The Resource Center, Inc. are not affiliated companies. Investing involves risk, including the potential loss of principal. Any references to protection benefits or lifetime income generally refer to fixed insurance products, never securities or investment products. Insurance and annuity product guarantees are backed by the financial strength and claims-paying ability of the issuing insurance company. Neither the firm nor its agents or representatives may give tax or legal advice. Individuals should consult with a qualified professional for guidance before making any purchasing decisions. The Resource Center, Inc. is not affiliated with the U.S. government or any governmental agency. 781073 – 12/20