Promises to improve Americans' personal finances paved Donald Trump's road back to the White House. But will the Trump 2.0 agenda make you better off?
Trump seeks to make his 2017 tax cuts that expire at the end of 2025 permanent. He might pursue even more cuts, including tax breaks for big business. He's also pushing for less regulation.
He promises to fight for and protect Social Security and Medicare with no cuts or changes to the retirement age. He also pledges to slash inflation and reduce roadblocks to the buildout of cryptocurrencies like bitcoin.
The president-elect also wants to eliminate taxes on Social Security, which the IRS says impacts 40% of Americans who get benefits. He's calling for no taxes on tips for hospitality workers or overtime pay. He wants to do away with the cap on state and local tax deductions, better known as SALT.
Who Pays For All The Perks?
The incoming president plans to pay for his economic initiatives by slapping tariffs on imported goods. But economists warn that lower taxes and tariffs will result in higher prices for goods.
Americans shouldn't do much with their money until they see which policies become law, says Mike Valenti, director of tax planning at Carson Group.
"We are encouraging clients to take a wait-and-see approach," said Valenti. "The most important thing is to not have a knee-jerk reaction when it comes to your finances and make drastic changes right away."
So, how will Trump's policies impact your financial life?
Taxes And Trump
Heading into the election, the biggest wild card was whether key provisions of the Tax Cuts and Job Act (TCJA) of 2017 would be extended by Congress. Trump's win and what looks like a Republican sweep of Congress boosts the odds that they will.
A continuation of current tax policy should stabilize people's taxes. "Tax policy is now going to be a nonevent for most people," said Jamie Cox, managing partner and financial advisor at Harris Financial Group.
"Extending TCJA … would avoid one of the largest nominal tax hikes in U.S. history," said Gil Fortgang, a Washington associate analyst at T. Rowe Price.
Americans will continue to benefit from lower income-tax brackets and the larger standard deduction on Form-1040. The $2,000 child tax credit will survive as well. The Alternative Minimum Tax (AMT) will ensnare fewer taxpayers.
"This was Trump's signature tax code (overhaul), and we may get some permanency there, which should be beneficial," said Jason Grover, financial planning specialist at Grover Financial Services.
Clarity on taxes is another plus, adds Grover. Why? It gives Americans more certainty as to what their after-tax pay and tax bill will look like in 2025 and beyond.
Taxes To Rise In The Future?
Still, government deficits are expected to rise due to Trump's tax and tariff policies. Some investment pros fear taxes will have to go up at some point. As a result, they're recommending clients take steps now to benefit from lower income-tax brackets.
In fact, one financial advisor advises clients to move capital into Roth IRAs to benefit from tax-free withdrawals down the road.
The extension of the Trump tax cuts buys time for investors and retirement savers to shift money out of traditional 401(k)s and IRAs. These vehicles are taxed at higher ordinary income rates.
"We have a math problem with all this spending no matter which party won," said Chris Hernandez, founding partner at Strategic Capital. "So, the type of planning we're doing now is to take advantage of lower rates by converting as many dollars as possible to Roth dollars. There's still a sense of urgency."
Estate Planning And Trump
If the TCJA becomes permanent, financial pros expect Trump to extend the higher estate-tax exemption. The exemption in 2024 is $13.6 million per individual and $27.2 million for couples. And that means high-net-worth Americans will still shield sizable assets from taxes.
The Trump win and expected Republican sweep in Congress also mean the odds of eliminating the so-called step-up in cost basis are lower, says Cox. The current taxation of assets of the deceased — which are valued at the time of the deceased's death — will likely remain intact. The step-up in cost basis mainly benefits the wealthy, says Cox.
Retirement Planning And Trump
The stock market is expected to respond favorably to Trump's platform of growth, deregulation and lower corporate taxes, experts say.
If Trump can further reduce corporate tax rates, the savings will fall straight to companies' bottom lines, says Daniel Milan, a founding partner and chief investment officer at Cornerstone Financial Services.
"The policy benefits equity assets that are owned in retirement accounts," Milan said.
Stock prices — especially for small caps and sectors seen benefiting from less regulation like financials, energy and bitcoin — have already enjoyed a "Trump bump."
The stock market's 2.5% surge on the day after Election Day bodes well for future returns. Following the nine other post-Election Day advances, the S&P 500 was up 9.5%, on average, 12 months later, according to LPL Financial. In contrast, in the year following a down day after Election Day, stocks rose only 4.7%.
The Russell 2000, a small-cap stock index, has posted an average 12-month return of 20.1% in the last 10 presidential election years, vs. a 16.8% rise for the large-cap Russell 1000, according to Royce Investment Partners data.
Trump's economic policies, Milan says, "is like throwing kerosene on the fire for small and midsized companies."
More than a third (35%) of BofA Global Research clients say the best-performing equity index in 2025 will be the Russell 2000 small-cap index.
Income And Trump
If inflation remains sticky due to Trump's policies, bond yields may stay higher for longer. Higher yields could provide more income for retirees. "Income generation potential continues to be very attractive today," said Rick Reider, chief investment officer of global fixed income for BlackRock.
Trump's no-tax pledge on Social Security would boost the take-home income of the 40% of benefit recipients who pay taxes on up to 50% or 85% of their benefits.
"I think for retired people who need the money that have been squeezed by inflation, it is going to be a major benefit" if it passes, said Cox.
What About Social Security?
Trump pledges to protect Social Security. But his tax breaks, tariffs and plans to deport undocumented immigrants could drain the reserve fund for Social Security by 2031. That's three years earlier than current estimates, according to the Committee for a Responsible Federal Budget, or CRFB.
As a result, benefit payments would be cut by 30% to 31%, reaching 33% by 2035, the report said.
"This could be a huge problem for many Americans given that the largest generation, the baby boomers, is now retiring," said Valenti.
Trump has raised the prospects of cutting corporate taxes from 21% to 15% for companies that make their products in the U.S. And that could benefit retirement savers indirectly. How? It could induce Corporate America to boost benefit packages. Some might increase 401(k) employer-matching contributions.
"I think companies that have a lot more cash flow will be a lot more generous," said Grover.
Real Estate Under Trump
Trump's policies will have a mixed impact on real estate, says Danielle Hale, chief economist at Realtor.com.
On the bullish side, Trump's plans to increase housing supply by cutting back on building regulations and opening federal land for construction. The total cost of regulation currently adds more than $90,000 to the price of a new home, according to Hale. "Efforts to reduce regulation could make it easier for builders to add homes at lower price points," said Hale.
On the bearish side, Trump's pledge to deport undocumented immigrants could cut demand for housing. It could also cause a shortage of workers to build new homes. What's more, Trump's tariffs could also add to the cost of lumber, steel and other materials, says Hale.
Hale adds that Trump's pledge to slay inflation would lower borrowing costs and improve housing affordability. But Trump's policies could have the impact of raising inflation, which could push mortgage rates higher, she warns.
Savers, investors and homebuyers should wait and see what Trump policies are put into effect and what impact they'll have.
