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 declared that cutting government spending is a priority, and to that end, he has established the Department of Government Efficiency, which will investigate various government expenditures and aim to trim the fat to achieve a net surplus.
The problem is that governments are not businesses, so affected individuals have little to no recourse once the cuts begin. Many will fall into poverty, but there are some steps that can be taken to mitigate the impact before anything changes.
According to Jasmin Smoots, vice president of operations at PensionBee, Social Security’s long-term viability is under threat, and Trump’s proposed measures are unlikely to 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 difficult because the Trump administration favors cutting and slashing taxes across the board,” she said. “The main potential replacement could come from tariff funding, 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 exceeding the incoming administration’s latest proposals of 25 to 35%. Without a credible replacement for any tax cuts, Social Security could easily become a target of campaign promises.”
This is why it is up to beneficiaries to make wise decisions that will help them get through.
Build Up Your IRA
Individual retirement accounts (IRAs) are separate from Social Security and have been used for years to supplement insufficient benefits. 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 funding 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 fact, it provides a tremendous 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 benefits, this could help you fully fund your retirement needs.
Make sure you have enough
Trying to get more is always tempting, but in a delicate time like retirement, making sure you have enough and preserving your wealth may be even more important.
Czajka cautions, “Another best practice is ‘owning your number.'” That’s correct. Owning the number you need is far more important than risking your numbers. “After retirement, losses can hurt more than gains can help,” he stated.
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