Every change in presidency ushers in a new era, but the Trump presidency may bring about more changes than we are accustomed to, particularly to programs such as Social Security.
President-elect Trump has said that lowering government spending is a priority, and to that end, he has established the Department of Government Efficiency, which will investigate various government expenditures and strive to trim the fat to generate a net surplus.
The difficulty is that governments are not businesses, thus impacted persons have little to no redress once the cuts begin. Many will fall into poverty, but there are some steps that can be taken to lessen the damage before anything changes.
Jasmin Smoots, vice president of operations at PensionBee, advises GoBankingRates that Social Security is facing significant challenges that threaten its long-term stability, and Trump’s suggested remedies would not necessarily help.
“Trump has recently floated an explosive proposal to eliminate federal income taxes, some of which fund Social Security.” Replacing this income source would be tough because the Trump administration favors cutting and slashing taxes across the board,” she said.
“The main potential replacement may come from tariff revenue, but the amount of tariffs required to replace the federal income tax is massive. Replacing the federal income tax in its entirety would necessitate tariffs as high as 75%, far beyond the incoming administration’s current projections of 25 to 35%. Without a credible substitute for any tax reduction, Social Security could quickly become a target of campaign pledges.”
This is why it is up to recipients to make wise decisions that will help them get through.
Build Up Your IRA
Individual retirement accounts (IRAs) are independent from Social Security and have been used for years to supplement deficient payouts. Increasing your contributions while you still have the opportunity will significantly increase your retirement income.
Smoots clarifies: “Diversifying your income sources and supplementing Social Security income through an individual retirement account can significantly enhance your financial security and peace of mind,” according to her. “IRAs are a powerful tool for retirement savings, but less than a third of households have a traditional IRA.”
Contribute to Your HSA
Healthcare costs only rise as you get older, so setting up and supporting one of these accounts can save you a lot of hassle in the long run. Smoot concurs: “Retirees should prepare for rising healthcare costs by exploring supplemental insurance options, health savings accounts (HSAs) and long-term care insurance,” she wrote. “These tools can help offset potential gaps in coverage and ensure financial security.”
Capitalize on Lower Taxes by Saving Up
Because the Trump presidency is expected to reduce taxes, capitalizing on this fact will benefit many, as Chuck Czajka, certified Social Security claiming strategist and founder of Macro Money Concepts, explains:
“Trump’s election victory does not give you permission to change your retirement income planning. In reality, it provides a wonderful opportunity in the short term,” he explained. “It appears that the Tax Cuts and Jobs Act (TCJA) will not fully sunset in 2025.
This means that taxes will be on sale for a few more years, providing an excellent opportunity to convert your taxable retirement plans to a tax-free environment. When combined with other options such as tax-free Social Security income, this could help you fully fund your retirement needs.
Make sure you have enough
Trying to gain more is always appealing, but in a delicate period like retirement, making sure you have enough and preserving your wealth may be even more crucial. Czajka cautions, “Another best practice is ‘owning your number.
‘” That’s correct. Owning the number you need is far more crucial than jeopardizing your numbers. “After retirement, losses can hurt more than gains can help,” he stated.
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