Today’s edition could be a risky one to write, as anything related to the recent US Presidential election can stir up division. BUT – there are a healthy handful of issues that unite all Americans. These issues, ironically, are similar to those facing the 2016 version of President-Elect Trump.
Below are excerpts (in italics) from a November 2016 edition of TGIF 2 Minutes with thoughts on updates for 2024 (in bold) –
Historic times these are as President-Elect Trump gears up to lead our country.
The issues that face him are HUUUGE, as “The Donald” would say (this phrase was funny back in 2016). But really, the issues that face him – and us – are huge. Here are a handful of the biggest financial and economic issues:
Retirement and Social Security for Americans
– Retirement policy experts differ widely on this topic. In summary, higher economic growth would be positive for safeguarding Social Security for future beneficiaries. Economic growth under a productive President and Congress could be predicted to generate increased tax revenue for the program. But Social Security and overall retirement are complex subjects that rely on individuals and employers having varying degrees of responsibility.
- Today, in 2024, there still exists a “retirement crisis”. On January 1, 2025, new expanded maximums of 401k/403b saving will kick in for workers aged 60 – 63. Tax policy still favors saving in 401k, IRA and Roth IRA accounts.
- There are hopes that a higher portion of Social Security can be free from Federal income tax. This would require changes to current tax law.
Regulation of the US financial system
– After the 2008-2009 financial crisis, large global insurers were put under a magnifying glass for several of their practices that were partly to blame for the markets’ breakdown. Parts of the resulting regulation were put in place to protect investors and parts of the regulation are onerous. All financial institutions are still adjusting, and a handful of the biggest banks and insurance companies still need to be reined in.
- The SEC made very little progress since 2020 toward investor protection and lessening onerous regulation.
- As of January 2021, up to $135,000 of 401k monies could now be used to purchase certain types of annuities, including (confusing) indexed annuities.
- Not exactly progress in lowering investment costs and simplifying savings strategies available to individuals. Much work remains to be done.
Interest rates and the US Bond market
– A stronger economy generally means higher interest rates and slightly higher inflation. We currently need higher interest rates for a whole host of reasons (pension guarantees, retiree savings) but higher inflation eats away at our purchasing power. We saw the immediate market effects (in 2016) of post-election excitement regarding initial anticipation of a stronger economy under a President Trump. Bond yields rose as bond prices fell. Stocks still offer higher long-term growth potential versus bonds when looking back at history.
- We got our wish of higher interest rates back in 2022, but amidst brutal inflation following the end of the pandemic.
- Interest rates will remain a sensitive subject, with a delicate balancing act once again for the US Federal Reserve between low-but-not-too-low interest rates (encouraging the return of inflation) and high-enough interest rates to maintain a healthy, expanding economy.
Healthcare costs and the health insurance landscape in America
– This issue can (in 2016) be a topic on its own for a future TGIF 2 Minutes. President-Elect Trump, while popularly campaigning to wipe out and overhaul the healthcare law, has expressed an interest in preserving pieces of the Affordable Healthcare Act that are constructive. This could be HUUUUGE for ALL Americans.
- In 2024, healthcare coverage and costs remain one of the most critical aspects to most Americans’ lives, no matter for the wealthy, modestly wealthy or those struggling to afford day-to-day.
- The high costs of employer healthcare plans and complexity of enrolling in Medicare plans need to be addressed by a combination of lawmakers, insurance companies and “middlemen” such as pharmacy benefit managers.
Back to the present in early December 2024, as the year nears a close there is a great deal for which to be grateful amidst the challenges. With Thanksgiving having recently passed, I would like to emphasize the “T” in TGIF and say Thank you for reading and commenting each week! The acts of saving and investing take hard work and focus – and are mostly (not always but mostly) tasks within our control, as opposed to the list of items reviewed above. Please continue to reach out to me for advice on spending, saving, investing and the unique challenges that present themselves to you and your family.
This material has been prepared for informational purposes only and is not intended to provide, and should not be relied upon for, tax, legal or accounting advice.