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The Election and Your Clients: Two Risks to Watch

Becky Swansburg
Becky Swansburg

Unless you’ve been living in a cave, you know there’s a big election coming this November.

(And even if you’ve been living in a cave, I’m sure the direct mail companies have found a way to reach you with political mailers…)

But did you know the election could greatly impact your clients… and their retirement approach? 

I spent my early career working in the White House and on Capitol Hill. And one thing I learned was that elections can impact U.S. savers in two ways: 

  • Short-term impacts based on new laws and regulations (what policies will a given administration pursue? What laws will Congress pass?) 
  • Long-term impacts based on the future effect of the laws and regulations passed today (will taxes be higher in the future to offset today’s spending? What will today’s regulation do to future economic conditions?)

The 2024 election could have both short-term and long-term impacts on U.S. savers. And those savers are going to need the help of financial advisors to weather the storm.

What's at Stake in November

November’s Presidential Election looks like it will be a rematch between current U.S. President Joe Biden, and former U.S. President Donald Trump. Equally important is the makeup of Congress: who will control the House and Senate, and how tight will their margins be?

Here are the top two items I’m watching in the 2024 election when it comes to retirement savings in the U.S.:

  • Trump Tax Cuts: In 2017, Congress passed and the President signed into law comprehensive tax reform called the Tax Cuts and Jobs Act. This law lowered individual income tax rates for millions of Americans (myself included and probably you, too). 

But those tax cuts were not permanent. In fact, they expire next year in 2025. That means unless Congress and the President act to extend those cuts or pass new cuts, all of our tax brackets will revert back to their older, higher rates in 2026. 

This matters to any saver who has funds in a tax-deferred retirement vehicle, like a 401(k) or IRA. Since taxes on retirement savings are often deferred to the future, higher tax bracket rates in the future could mean higher taxes for your clients… leaving them sending more money to the IRS and having less to spend as retirement income.

President Biden has indicated he wants to let the tax cuts expire for wealthier Americans while extending them for lower-income Americans. He plans to pay for the extension with new taxes on wealthier Americans. President Trump has indicated he wants to extend the tax cuts for all Americans. And then there’s the question of Congress: Will the House and Senate pass an extension? 

All of it adds up to a big question mark on future tax rates for your clients. 

  • Government Spending: The federal debt has exceeded $34 trillion. Congressional spending continues to grow. And our population is aging, meaning more Americans are relying on government programs like Medicare and Social Security. 

All of it adds up to a big math problem for our federal government. And a big question around how each administration might address this problem. 

I detailed the government spending problem (and how it could impact your clients) in this blog post from earlier this year. Regardless of the 2024 election outcome, it’s hard to see a path forward that doesn’t include higher taxes for your clients - and that’s a risk many savers want to protect themselves against going forward. 

 

Want a Deeper Dive? Watch this Video & Read this Analysis 

Here at Stonewood Financial, I host a State of the Union call each quarter focused on the latest news from Washington and how it could impact your clients. 

Last week’s call was all about the 2024 election and the impacts listed above. If you’re interested in diving a little deeper into how to protect your clients from the election outcome, I invite you to watch the recording:

Watch Now: The 2024 Election & Your Clients

I also authored an analysis of the election and its potential to impact savers with retirement funds in 401(k)s and IRAs. You can read that analysis here:

Read: How the 2024 Election Could Impact Your Clients… And What to Do About It 

Any way you look at it, the 2024 election will increase the political divide and instability in our nation. And that makes it harder to predict legislative and regulatory outcomes for your clients. 

Your clients need protection against changes coming from Washington. And advisors who understand tax and asset diversification are best poised to help. Need support? Stonewood Financial’s software and marketing tools have you covered.