Buckle up, as President Trump could change your retirement in myriad ways. If you’re a retiree or have a 401(k) or IRA retirement account and you’re wondering what it all means for your bottom line, you’re not alone. Trump’s return to the White House means new economic policies are heading to a Main Street near you. Whatever your age, your retirement planning strategy may need a rethink.
But it’s still too early to know for sure how your finances will be impacted. Despite the Republicans’ sweep of Congress, the GOP has an extremely narrow House majority. And that means it’s still unclear if Trump can get enough votes in Congress to translate all his campaign pledges into policy. “With Trump officially being in office, there are a lot of moving parts that are difficult to anticipate,” said John Jones, investment advisor representative at Heritage Financial. “Time will best tell what campaign policies will ultimately affect retirement, investment and income outcomes.”
On the campaign trail, Trump 2.0’s main pocketbook promises were to extend his 2017 tax cuts for workers, push for deeper tax cuts for corporations, protect Social Security, end inflation, lower everyday costs and make housing more affordable. To help pay for it all, Trump plans to boost revenue with his pro-growth platform and slap tariffs on foreign-made goods entering the U.S.
It’s important to note that while presidential policies can move the economic needle, the president can't control over all the levers that make the economy and financial markets go. “The economic trends and forces that are in place are far more powerful than presidential policies,” says Ross Mayfield, investment strategist at Baird Private Wealth Management. Indeed, a stronger-than-expected U.S. economy and job market early in 2025 is once again pushing up interest rates and borrowing costs as well as boosting fears of a return of inflation, creating fresh challenges for Trump at the outset of his second term in office.
Trump could change your retirement
In short, there’s nothing to say that Trump can push through everything on his economic wish list. “We don’t really know what will actually come to fruition,” says Lindsay Theodore, thought leadership senior manager at T. Rowe Price. Still, Trump’s tax, tariffs, and immigration policies could all impact retirement portfolios, adds Theodore.
No doubt, Trump’s policies can have an impact — both positive and negative — on the nation’s retirement readiness.
“Based on conversations I’m having with clients now, it’s a mixed bag,” said Rachele Tubonganua, a private wealth advisor at U.S. Bank
Here are eight ways President Trump could change your retirement.
1. Lower Taxes Means More Money to Spend and Save
If Wall Street is correct, and Trump can extend the Tax Cuts & Jobs Act (TCJA) of 2017, which expires at the end of 2025, Americans can avoid paying higher taxes and seeing their paychecks shrink. (If the TCJA is allowed to sunset, tax rates will revert to the higher rates before the passage of TCJA.) This is one of the key items on Trump’s agenda that investors are watching. There’s still a feeling that lawmakers won’t let the tax cuts sunset. “I think everybody recognizes they can’t let that happen,” said Tim Steffen, director of advanced planning at Baird. “So, they’ll figure it out.”
An extension of TCJA is a tailwind for spending. “Fewer taxes mean more money in your pocket,” says Chris Mediate, president of Mediate Financial Services. “This could enhance retirement savings, as retirement is always about the money you can keep from your income.” So, those are plusses for retirees on fixed incomes and pre-retirees still in the asset accumulation stage.
An extension of the TCJA would also mean that people have a longer runway to take advantage of the lower tax brackets, says Tubonganua. One strategy to consider is converting traditional 401(k) and IRA dollars into a Roth IRA, which allows for tax-free withdrawals. A similar option is to convert a traditional 401(k) into a Roth 401(k). The time is right now because with tax rates low, you’ll pay less taxes on the dollar amount you convert to a Roth account. “The narrative is to really minimize taxes in the future (when they are likely to be higher),” says Tubonganua. “You want to take advantage of opportunities that are available to you right now.”
2. Social Security: OK for Now but Potential Cuts in the Future
Trump vows to fight and protect Social Security. He says he “will not cut a single penny” and plans no changes to the retirement age. In the short run, that’s a plus, as those receiving Social Security checks can continue to count on 100% of their benefits. “I don’t think people have to worry about their checks,” says Mayfield.
He’s also proposing to end taxes on Social Security benefits. Depending on a retiree’s income, up to 85% of benefits could be subject to taxes under current law. “It would clearly have an impact on retirees,” said Steffen. “It makes Social Security benefits that much more valuable.”
But there’s a downside: it’s a costly proposal that puts Social Security on even shakier ground. Ending taxes on Social Security may sound like a welcome break for retirees, but there are some potential pitfalls. There’s a risk that full benefits won’t be paid a decade from now, as Trump’s current policies don’t offer fixes to address Social Security’s weakening financial positioning. Social Security recipients will get 100% of their benefits through 2033. However, after that, unless Congress takes steps to shore up Social Security, the trust fund will be depleted, and the government will only be able to pay 79% of earned benefits thanks to ongoing Social Security payroll deductions from working Americans. “In 10 years, checks will be cut by 21% and nobody wants to see that happen,” said Theodore. “So, that’s a big concern that we’re watching closely.”
Perhaps more worrisome, the Committee for a Responsible Federal Budget says that if Trump’s pledges to eliminate taxes on Social Security, tip and overtime pay, and tariffs on trading partners get passed, it would further widen the Social Security fund’s deficits and speed up the fund’s insolvency by three years.
Despite the uncertainty about the solvency of Social Security, Theodore still advises people to take Social Security later to lock in a larger lifetime benefit rather than panicking and taking benefits earlier at a reduced rate. “It’s about a 70% difference between your (benefit) paycheck at 62 versus waiting until age 70,” said Theodore.
3. How slashing corporate taxes could lift your 401(k)
Trump wants to lower the corporate tax rate from 21% to 15%. If he’s successful, the dollars that corporations avoid in taxes go right to their bottom line, which boosts their profitability. And corporate earnings are a key driver of stock prices. So, retirement savers who own stocks could see the value of their holdings in their 401(k) plans rise, says Baird’s Mayfield. Similarly, Mayfield says Trump’s push to reduce regulations on businesses to boost animal spirits, coupled with tax cuts, also bodes well for stock investors. “They are all tailwinds for corporate profitability,” says Mayfield.
Adds Mediate: “When markets perform well, many retirement challenges are mitigated.”
On the negative side, however, inflation and interest rates could rise if Trump’s policies stoke too much growth. And that one-two punch could cause both the stock and bond markets to fall in value, reducing retirement account balances.
Theodore says an active management approach to investing could outperform during Trump’s next term. Portfolio managers are more nimble and can move more money into stock in sectors of the economy that will benefit from the new president’s policies and allocate less capital to sectors that will suffer.
There have also been rumblings in the private equity world that Trump’s preference for fewer rather than more regulations could pave the way for private equity investments to be allowed in employer-sponsored retirement accounts via target-date funds and other types of funds, according to a report in Pensions & Investments.
Private equity investments, which are not publicly owned companies that trade on the New York Stock Exchange or Nasdaq, tend to be less liquid investments (codeword for not as easy to sell). However, since retirement accounts are long-term investments, proponents of private equity say it could add more diversification and upside potential to retirement accounts. “Over 99% of American businesses are private, and these investments allow people to participate in a much broader universe of opportunities,” says Michael Weisz, founder and CEO of Yieldstreet, an alternative investments platform. Moreover, a 2023 study by Georgetown University’s Center for Retirement Initiatives found that substituting a 10% private equity stake for publicly traded stocks in a portfolio netted a better median return of 0.22% per year and produced positive outcomes 80% of the time.
4. Tariffs could feed inflation, hurting Americans’ purchasing power
Trump's tax cuts and other programs will rely on revenue from a controversial source: tariffs. One of his first actions upon taking office was to promise 25% tariffs on Mexico and Canada, to start on February 1, 2025. On the campaign trail, Trump pledged to levy tariffs of up to 60% on China and 10% to 20% on other countries importing goods to the U.S. Trump also proposed a Panama Canal tariff.
Tariffs, however, could have an unintended consequence: They could cause inflation or increase consumer prices, which would result in higher interest rates if the nation’s central bank needed to tame inflation.
Both factors could put a dent in retirees' and working Americans' purchasing power. “The costs of tariffs will be passed on to the end consumer, so it ends up being somewhat of a sales tax,” says Theodore. “The dollar might not go as far for retirees on a fixed income," adds Theodore. Prices could go up for cars, dishwashers, and other consumer products. And a return to inflationary times would be a negative for all Americans, who are still hurting from the post-Covid spike in inflation that peaked at 9.1% in 2022, its highest level since 1981. Tariffs imposed by Trump in his first term as president also acted as a headwind for stocks, adds Mayfield.
Tariffs would also hit the economies of some states especially hard, particulary those in the Midwest and South.
5. Health care costs could rise
Part of the Inflation Reduction Act (IRA) passed by the Biden administration aimed to lower the out-of-pocket health-care costs for older adults, including capping the cost of insulin used to treat diabetes at $35 a month, capping out-of-pocket costs for prescription drugs at $2,000 per year for U.S. older adults, as well as reducing the cost of the first 10 drugs selected for Medicare price negotiation. The IRA expires at the end of 2025.
Similarly, the Affordable Care Act (ACA) passed during the Barack Obama presidency made health care coverage affordable for 45 million Americans with the help of government subsidies and premium tax credits and the creation of the health insurance marketplace. The premium subsidies also expire after 2025 unless Congress acts. The risk, of course, is if a Republican-controlled Congress moves to repeal the IRA or doesn’t renew the ACA premium subsidies, says Theodore, who advises clients to watch this development closely, as it can have a huge impact on the affordability of health care.
“Health care is a big question mark,” says Patti Brennan, CEO of Key Financial. “It’s probably safe to assume those costs will increase for most people who are retired.”
6. Deportation of undocumented immigrants could have negative effects
Many of the undocumented immigrants that Trump has threatened to deport earn and spend money in the economy and are key sources of labor in agriculture, housing and other services, Theodore notes. One potential downside is the cost of fruits and vegetables could rise, pinching the budgets of retirees and other Americans. What’s more, it could result in even higher costs for new homes and home renovations if labor costs rise as the supply of workers shrinks.
7. Market volatility could rise
There’s a risk that Trump’s policies, many of which could feed inflation and investor uncertainty, could cause increased financial market volatility. If stock and bond prices suffer steep price corrections, retirement savers and retirees will have to ensure they have solid financial plans in place that allow them to ride out the storm. Getting spooked and making poor financial decisions due to fear will only make matters worse.
“The market prefers stability, right?” says Steffen. “It likes certainty. And Trump (and his policies could cause) uncertainty.” Investors and retirees must not get caught up in the noise, says Steffen. “Don’t make long-term bets based on the latest proposal or talking point or tweet,” says Steffen.
8. Gridlock may not be good this time around
The Republican sweep of Congress raised hopes that much of Trump’s campaign pledges would have a clearer path to becoming law. But the narrow GOP majority in the House could mean legislative gridlock.
Normally, Wall Street likes gridlock, because it means big changes are not forthcoming and the status quo remains intact. However, gridlock this time around could be negative, warns Steffen. Gridlock, for example, could mean the Tax Cuts and Jobs Act of 2017 could be allowed to sunset at the end of the year, causing Americans’ paychecks to shrink. It could mean Trump’s plans to make Social Security benefits tax-free doesn’t happen. In short, many of Trump’s proposals that are deemed as beneficial to many Americans might not come to fruition. “The very slim majority in the House means all it takes is one or two votes to change everything,” says Steffen.
Keep calm and carry on
Despite all the different ways a second Trump presidency could impact your money and retirement, the best advice is to stay the course and keep executing your financial plan, says Tubonganua. “Focus on your long-term plan and goals and objectives,” says Tubonganua. “Tweak it (your plan) here and there if needed once policies do come into play and impact your finances.”
