Four Ways to Evaluate the Election for Your Clients

The election is almost here, and it could have a BIG impact on our clients and their retirement assets.

Will the Trump Tax Cuts get extended? Will new taxes be imposed on retirement accounts? What about Social Security and government spending? 

As financial advisors, it’s important that we understand what’s happening with the election. But equally important, we need to understand how to leverage the election to help our clients make informed decisions about their retirement assets. 

So, what does that mean for you and your practice? 

All eyes are on the election. It’s up to us to use this attention to motivate our clients to make adjustments that protect them against the changes coming from Washington—this November and beyond. 

So, how should we approach the election to best serve our clients?

Four Notes on Positioning the Election for Your Clients and Prospects

Last week, I hosted a webinar outlining four important components of successfully leveraging the 2024 election in your practice. You can watch the webinar recording here.  

Here are the four areas that deserve your attention:

1 | Evaluating the Election | So, what does it mean to evaluate the election’s impact on U.S. savers? What we’re really trying to do is see how this election impacts two emerging risks for our clients and prospects: 

• First is Tax Risk, which is the risk that a person’s taxes are higher in retirement than planned. This is a big risk if the majority of your client’s retirement assets are in tax-deferred vehicles like IRAs and 401(k)s. After all, rising taxes means more of a retiree’s income is going to the IRS, and less of that income is staying with your client to spend on living expenses. In short, Tax Risk measures the level of taxation a saver experiences in retirement.

  Depending on the election’s outcome, we may see tax risk in action next year. In 2025, several provisions from the 2017 Trump Tax Cuts are set to expire. This includes the reduction in individual income tax bracket rates. So, in 2026, many savers could find their tax bracket rates higher than they are today, causing them to pay more in taxes while maintaining the same income.

• Next is Legislative Risk, which is the risk that Congress changes the rules, and those changes negatively impact your client’s retirement approach. Legislative Risk measures the structure of taxation a saver experiences in retirement: what is taxed, when it is taxed, and for whom it is taxed.

  A good recent example of legislative risk is the 2019 Secure Act. In this legislation, Congress included a provision eliminating the Stretch IRA for most Americans. This change impacts when inherited IRAs are taxed, potentially upending tax strategies that IRA owners have put in place for their heirs.

By evaluating this election’s potential to increase Tax & Legislative Risk in retirement, we’re helping uncover the risk that our clients could end up with a bigger tax bill—and therefore less income—in retirement.

2 | Phases of Communication | We’ll need to prepare for two distinct but connected phases of communication with our clients and prospects. 

• We’re in the first phase right now, and it will last until the election results are known in November. This phase is all about helping our clients understand how the unpredictability of elections (November’s included) can drive legislative risk in retirement.

• Phase II will begin after the election and likely carry us through the Inauguration in January well into Q1 2025. This phase will be about communicating to our clients what the election outcome could mean to their retirement approach. 

3 | Quantifying the Election’s Impact | I spent my early career in Washington, working in the White House and on Capitol Hill. I quickly learned there are two distinct ways we need to evaluate what happens in Washington, especially when it comes to elections and legislative proposals: 

• First, the near-term impact: What specific legislation might the next Congress and President pass that could impact U.S. savers, IRAs and 401(k)s, estate taxes, and more? One big area of short-term focus will be the potential extension of the 2017 Tax Cuts and Jobs Act tax bracket rate reductions. Trump has said he would like to keep brackets lower for all Americans; Harris has indicated she would only extend the rate reductions for lower- and middle-class Americans. 

• Second, the long-term impact: What do the priorities of the incoming administration mean for America’s economic, tax, and debt environment in the decades to come? Long-term, the biggest impact will be the impact of the new administration’s policies on our national debt - and what that means for future revenue needs (i.e., increases in taxes). I wrote an in-depth blog post on how today’s spending could impact future tax rates here. It’s worth a read, along with my take on the CBO’s mid-year budget updates here. 

4 | Which Outcomes Matter | The Presidential election is certainly drawing most of the attention this year, which is to be expected. But while the President can set the policy agenda for our country, there’s only one branch of government that can actually pass laws: Congress. That means that while the Presidential election outcome is important for understanding the policy proposals we might see, the House and Senate election outcomes will be critical to understanding what kind of policy might get passed into law. 

Currently, both houses are expected to have thin margins for their majority. Which means passing laws could be more challenging for whoever ends up in the White House come January. Of course, it could also mean the President turns towards executive orders and agency regulations to enact their policy agenda. So, we’ll need to keep a close eye on the legislative and executive branches in the new administration. 

Preparing our Clients for What Comes Next

Regardless of the election’s outcome, there are other BIG risks coming from Washington that could impact your clients and their retirement.

If you want to help your clients prepare, it’s important to get educated on the election and the emerging risks for your clients. A great place to start? Watch the webinar I just hosted:  The 2024 Election & Your Clients.

Now is the perfect time to start leveraging what's happening in Washington to attract leads, book appointments, and move clients toward meaningful, informed decisions.