We’ve all heard about the best practices of retirement planning — start early, contribute regularly, diversify your portfolio and regularly assess and review.
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However, the vast policy differences between President Joe Biden and former President Donald Trump could also impact your retirement plan.
“Policy changes often causes shifts in the market,” explained Jonathan Feniak, an attorney and founder of Feniak Consulting Group, LLC. “As such, watching for policy indications can help savvy investors predict which sectors might grow or shrink, thereby contributing to their investment decision-making process.”
Feniak said, “Depending on the candidates’ stance on Social Security and retirement-related policies, individuals may need to reassess their retirement planning strategies.”
Will Biden or Trump do more for your retirement plans? Here are the predictions.
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Savings Contributions
Generally, Trump’s policies benefit high income households while Biden’s favor low- to middle-income earners.
Trump supported maintaining or expanding tax deductions for retirement savings. For example, a taxpayer in the 35% bracket who contributes $10,000 to a retirement account can deduct that amount from their taxable income, saving $3,500.
Biden proposed changing the tax benefits of 401(k) plans from a deduction to a tax credit. That means a low-income earner in the 12% bracket with a $1,000 tax benefit would see their savings grow from $120 (deduction) to $1,000 (credit).
Both candidates championed efforts to increase the age by which individuals must withdraw annually from their retirement accounts, expand part-time workers’ access to 401(k) accounts, and remove the age limit for traditional IRA contributions.
Investment Growth
According to a recent U.S. Bank Wealth Management study, historically, there has been no clear connection between the presidential election outcome and capital market performance in the mid- to long-term.
However, the candidates’ policies could affect individual sectors and industries. For example, the fossil fuels and financial services industries could see a bump under a second Trump presidency. Trump pledged to continue rolling back environmental regulations and lifting restrictions on oil and gas drilling. During his presidency, he also eased requirements on smaller banks and financial institutions.
Biden supports federal funding of the renewable and technology sectors. For example, the Biden Administration created new and expanded tax credits for clean energy generation projects, electric vehicles, and clean energy manufacturing. Under Biden, the Federal Energy Department earmarked $7 billion to establish clean hydrogen hubs across the country.
“President Trump’s focus on deregulation may spur market growth, potentially boosting returns for 401(k)s and IRAs,” said David Blain, CFA and founder of Blue Sky Wealth Advisors. “However, tax cuts could expand the deficit, leading to higher income taxes down the road.”
Social Security
Both Trump and Biden promised not to cut Social Security benefits. However, the similarities end there.
Biden proposed increasing Social Security benefits for those in their twilight years and for beneficiaries with low lifetime earnings. He also wants to apply payroll taxes on incomes of $400,000 or more.
Trump hasn’t proposed expanding Social Security. During his presidency, Trump introduced a payroll tax deferral in response to COVID. He suggested making the tax deferral permanent but came under fire due to its long-term funding impact on Social Security.
“President Biden’s plans to expand Social Security benefits and create auto-IRAs for workers without retirement plans may encourage more people to save,” Blain said. “However, his proposed tax hikes on the wealthy and corporations could slow market gains.”
Back to the Basics
The outcome of the U.S. Congressional elections could also impact your retirement plan. One-third of the U.S. Senate seats and all 435 U.S. House of Representatives seats are up for grabs.
Control of either or both houses could determine whether Biden or Trump continue their policies or implement new ones. However, Blain said bipartisan cooperation in Congress and with the White House is needed to alter retirement policy.
Blain advised voters to prepare for a range of outcomes by diversifying investments, taking advantage of employer matches, and adjusting allocations to their risk tolerance. Having a sound retirement plan mitigates risks due to a swinging policy pendulum.
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This article originally appeared on GOBankingRates.com: Will Trump or Biden Do More for Your Retirement Plans?