As we await President-elect Donald Trump’s second term, speculation about his impact on our finances is rampant. Americans are trying to parse his rhetoric on the campaign trail with the realities of the government as they decide how to plan for their future.
Here are the top five questions I’ve received about how to invest amid another Trump presidency:
Will Congress make changes that affect retirement plans?
While it wasn’t a major topic in this election, Trump has said in the past he doesn’t support changes to the 401(k) retirement account, which is shaped by a tax deduction. The Republican platform for 2024 doesn’t propose any changes, either, so this won’t likely be a priority for the GOP-controlled Congress.
Experts, however, have speculated that tax-advantaged retirement accounts might become a target for countering the costs of extending tax cuts Trump signed in his first term. Congress could attempt to balance the budget by eliminating the 401(k) tax deduction or lowering the limit on the amount you can contribute and deduct for tax purposes.
Republicans have also shown antagonism toward ESG funds, which consider how environmental, social and governance factors impact a company’s profits. The Labor Department during Trump’s first term issued a rule that had a chilling effect on workplace retirement plans that included ESG funds, a limitation that’s proven costly for retirement account administrators. The rule was reversed under President Joe Biden, but Trump could reinstate it and have the support of a Republican-led Congress to enact legislation that limits ESG factors in investing beyond 401(k)s.
How will market performance impact retirement savings?
A surge in stock prices is typical after a presidential election, according to Goldman Sachs Research’s recent forecast. We saw that when the S&P 500 climbed to a record high on Nov. 6.
But the firm’s two-year forecast is otherwise unchanged by Trump’s election. It noted some sectors could see significant changes because of Trump's proposed tariffs, and you’ll probably see headlines about those moves.
But saving for retirement is a long-term plan, and experts perennially recommend holding steady with your savings plan regardless of what the market is doing in the short term. Don’t panic and make big investment decisions right now, because whatever might change in the next few years will likely recover over time.
If you’re planning to retire in the next few years, work with a financial planner to reduce risk in your portfolio and protect against any short-term market shifts.
What changes can we expect to Social Security?
Trump proposed some cuts to Social Security funding and benefits on the campaign trail, and he’s walked those back after discovering they were unpopular.
But his promises to eliminate taxes on Social Security benefits, tips and overtime to help pay for the program could end up costing more in the long run, according to the Committee for a Responsible Budget.
Is this a good time to invest in real estate?
Real estate brokers are largely looking forward to Trump’s proposed policy agenda. They expect real estate to remain a strong and reliable investment, whether you’re upgrading your home or purchasing investment property.
“With Trump’s focus on deregulation, we might see policies aimed at keeping interest rates competitive, which could benefit homebuyers and investors,” said Levi Rodgers, co-founder at VA Loan Network.
Experts note that potential deregulation in lending could make borrowing easier, but none expect to reach the levels of deregulation that contributed to the housing crash of 2008.
“We don’t seem to have any looming systemic risk like we had in 2008 and [Trump] seems to be set on easing geopolitical tension, which should lead to a healthy and sustainable housing market,” said Robert Washington, a five-year real estate broker and founder at Savvy Buyers Realty. “We also should consider that most of Trump’s wealth is tied to real estate, so it’s highly unlikely that he would implement policies that would work against his own bottom line.”
Trump’s proposed policies to drastically increase tariffs and begin mass deportation of undocumented immigrants, however, could work against those interests. Raul Gastesi of the Miami-based law firm Gastesi, Lopez and Mestre pointed out that tariffs would raise the cost of construction materials, and a reduced labor pool would drive up wages. Both would impact the cost of construction and, therefore, the cost of real estate.
“I would recommend looking into the cost of building materials now if you plan on upgrading your home, before any tariffs are imposed,” Gastesi said. “Lock in prices for either the purchase of a home or as many materials for your remodeling as possible.”
Can I divest from companies owned by Trump and supporters?
Some folks who didn’t support Trump’s reelection want to avoid further enabling the president-elect and those he’ll bring into power by keeping money out of their hands. At the top of the list, alongside Trump himself, are campaign surrogate and soon-to-be White House adviser Elon Musk, and Jeff Bezos, owner of the Washington Post who blocked the newspaper's endorsement of Vice President Kamala Harris.
All three own tech companies that are popular in the stock market right now: Trump’s Truth Social, Musk’s Tesla and Bezos’ Amazon. All three companies are listed on major stock indexes, which means you invest in them if you invest in a corresponding index fund.
You can divest by pulling your investments from those types of funds and developing a portfolio that’s in line with your values. This strategy could come with higher cost and more risk, though. Work with a fiduciary financial planner to ensure your long-term financial security remains a priority.
