Former President Donald Trump has now returned to the presidency to begin his second term.
This could mark the return of some policies from his first term — such as his international approach on trade and isolation — but he may also roll out some new policies.
Here are five potential ways a Trump presidency could affect retirees:
1. He Could Eliminate Taxes on Social Security
During his campaign, Trump promised to exempt Social Security benefits from taxes. That would be great news for older adults who are typically on a fixed income.
Presently, up to 50% of benefits may be subject to federal income tax if an individual’s total income is at least $25,000, or $32,000 for couples. For those with incomes over $34,000 individually, or $44,000 for households, up to 85% of benefits may be taxable.
Removing these taxes would amount to more money in retirees’ pockets, but it could also present a problem.
2. The Social Security and Medicare Trust Funds Could Go Broke Sooner
The taxes on retirement benefits help fund the Social Security and Medicare trust funds. The Medicare trust fund is on pace to deplete in 2036 and the Social Security trust funds, 2035. Not collecting these taxes could bump up insolvency by two years for the Social Security trust funds, and six years for the Medicare trust fund.
Not collecting taxes on tips is an idea the Trump campaign has floated as well. If that were to happen, too, it could hasten insolvency.
3. Retirement and Health Care Programs Could Change
While on the campaign trail earlier in 2024, Trump said there is a lot to be done in terms of cutting entitlement programs like Social Security, Medicare and Medicaid. Though his campaign later said the cuts he spoke of were in reference to cutting waste within programs, instead of cutting funds or services.
Trump assured voters he wouldn’t make cuts to these programs. However, residents could still see their eligibility or benefits change.
An overhaul of the Affordable Care Act could also have some implications on early retirees who rely on the federal health insurance marketplace until they qualify for Medicare.
4. He Could Encourage the Reduction of Interest Rates
Though the Federal Reserve is independent of the president, Trump suggested there should be some involvement in its rate decisions. On the campaign trail, he’s been vocal about his distaste for interest rate hikes.
Investors could see lower costs for investing in property, thanks to lower interest rates. This could in turn potentially boost the value of their real estate investments.
On the flip side, much of the stock market gains under Trump’s first presidency in part came from the reduction of interest rates. And retirees often depend on decent savings rates on things like CDs and savings accounts.
5. The Tax Cuts and Job Act of 2017 Could Get Extended
The Tax Cuts and Job Act rolled out some significant changes, such as lowering individual rates across the board. Many of these new rates expire at the end of 2025, unless they are extended. Trump will almost certainly make sure they’re extended.
These cuts were especially beneficial for investors since they also lowered the capital gains tax rate for the top two brackets.
For retirees with a lot of investments, they could see more profits. On top of this, should the extension of these policies bolster the economy, it can then lead to stock market gains that would boost retirement funds as well.
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