Every political shift has the potential to significantly affect financial planning. With Donald Trump’s reelection in 2024, many Americans are wondering how his administration’s policies might impact their retirement strategies. Retirement planning is a cornerstone of financial security, and understanding how proposed changes could impact savings is crucial.

We believe staying informed and proactive is the best way to adapt to policy changes — and we’re here to help guide you through it.

A Look Back: The Tax Cuts and Jobs Act (TCJA) of 2017

To understand what the next four years may hold, it’s helpful to revisit the Tax Cuts and Jobs Act (TCJA) of 2017. Passed through a process called reconciliation — a fast-track method Congress uses to enact tax, spending, and debt limit changes — the TCJA introduced sweeping reforms that reshaped retirement and estate planning.

Unless Congress acts to make the TCJA permanent, its provisions are set to expire in 2025. President-elect Trump has pledged to extend these reforms, signaling they may serve as a foundation for new changes. Key elements of the TCJA that have influenced retirement planning include:

• Individual Income Tax Brackets: Lower rates enabled many to increase their retirement savings contributions. With more after-tax income, individuals could allocate more towards long-term goals.
• Doubling of the Standard Deduction: While simplifying the tax filing process for many, this change reduced the need to itemize deductions. Charitable giving, a popular deduction among retirees, was indirectly impacted.
• Estate Tax Exemption: By significantly increasing the threshold, the TCJA provided opportunities to transfer wealth with fewer tax implications. This has been a vital consideration for those planning legacies.
• Pass-Through Business Income Deduction: Entrepreneurs and small business owners benefitted from a 20% deduction, freeing up resources for retirement contributions.

These reforms have greatly influenced how Americans save and invest for retirement. As they approach potential sunset, their fate will likely play a pivotal role in upcoming financial strategies.

Potential Tax Changes Under President-Elect Trump’s Administration

President-Elect Trump has hinted at extending TCJA provisions while introducing additional reforms. Here are some key proposals to watch:

• Expansion of Tax Cuts: Trump has proposed lowering the corporate tax rate to 15% for domestic production activities, exempting Social Security benefits from income tax, repealing IRA green energy tax credits, and imposing a universal 20% tariff on all imports.
• Capital Gains and Estate Taxes: Further reductions in capital gains taxes and changes to estate tax thresholds could alter strategies for preserving retirement wealth.
• Simplifying Retirement Rules: Although details remain speculative, potential reforms could make saving for retirement more accessible and efficient for all Americans.

What This Means for Your Retirement Plan

Legislative shifts can feel overwhelming, but with a thoughtful approach, they also present opportunities. Our experienced team monitors regulatory developments to ensure your retirement plan stays aligned with current tax codes and policy trends. We evaluate your portfolio and identify strategies to maximize your investments while considering potential new tax laws. We position your retirement plan for long-term success and adapt it as policies evolve.

Certain foundational retirement planning strategies remain effective regardless of legislative changes. As we monitor potential policy updates, it’s crucial to continue implementing these tried-and-true approaches:

• Maximize Your Retirement Plan Contributions: Regardless of potential tax changes, contributing the maximum amount to your retirement accounts, such as 401(k)s and IRAs, remains a powerful way to build your nest egg. These contributions not only grow tax-deferred but may also provide immediate tax benefits. And don’t forget about properly utilizing the only triple-tax benefit account, Health Savings Account (HSAs), if you have access to one.
• Consider Strategic Roth IRA Conversions: A Roth IRA conversion can be a smart move, especially if you anticipate being in a higher tax bracket in retirement. This strategy allows you to pay taxes on your contributions now, potentially at a lower rate, and enjoy tax-free withdrawals in the future.
• Strategic Capital Gains Management and Tax-Loss Harvesting: Be thoughtful about triggering or delaying capital gains in account rebalancing or concentration reduction scenarios. Timing these actions can have significant tax implications and should be carefully considered within your overall financial plan. Relatedly, regularly reviewing your portfolio for tax-loss harvesting opportunities can help offset capital gains and reduce your overall tax burden. This strategy involves selling investments at a loss to offset gains in other parts of your portfolio.
• Explore Tax-Free Income Opportunities: Where appropriate, look for chances to earn tax-free income, such as through municipal bonds. This strategy can be particularly effective for high-income earners seeking to minimize their tax burden in retirement.

By focusing on these fundamental strategies while remaining flexible to adapt to potential legislative changes, you can build a robust retirement plan that stands the test of time.

2025 Planning Starts Here

It’s essential to stay ahead of the curve. With the right guidance, you can turn uncertainty into an opportunity to strengthen your financial future. Reach out to our team to discuss how the new administration’s policies might impact your retirement plan and how we can help you stay on track.