How the Second Trump Term May Affect Your Personal Finances

FINANCIAL ADVICE | GUIDANCE | INSIGHTS | OBSERVATIONS 

On January 20th, Donald Trump will be back in the Oval Office. Until then, White House staff will be dusting off the red carpet and changing pictures on the walls in preparation for his imminent arrival. Since he’s been there before, they know what to expect.

But the same can’t necessarily be said for the rest of the US. Many people are are wondering how his administration’s policies may shape personal finances. Covering a mix of promises, proposals, and potential shifts, this article explores the possible effects—both positive and negative—on savings, investments, and the broader economy.

Read below for our key findings on how Trump’s term may affect your savings, investments and cost of living, including those in the tech sector.

“Love him or hate him, no one has been able to figure out Donald Trump.”

– Ronald Kessler

New York Times bestselling author of books on the White House, Secret Service, FBI, and CIA

 

Key Findings

Tax Policy: Potential extensions of the Tax Cuts and Jobs Act (TCJA) could result in substantial tax reductions for higher earners and corporations, but may have limited impact on middle- and lower-income groups.

Economic Growth: Pro-business policies could drive stock market gains and job creation but may also lead to greater economic inequality or volatility.

Healthcare: Changes to the Affordable Care Act (ACA) could increase premiums or reduce benefits for some individuals, while others with employer-provided insurance may see minimal changes.

Social Programs: Proposed spending cuts could affect Social Security and unemployment benefits, creating challenges for those reliant on these programs.

While it’s impossible to predict exactly how the next four years will unfold, here are 8 broad areas where the actions of the Trump administration might impact personal finances.

Tax Policy Changes

Trump has pledged to extend the individual income and estate tax provisions of the 2017 Tax Cuts and Jobs Act (TCJA), and with the House of Representatives and Senate in Republican control, the effort is expected to succeed.

Income Taxes: Trump has expressed a desire to further reduce taxes for businesses and individuals. Higher-income earners and corporations stand to benefit most, potentially stimulating investments and business growth. Middle-class households may see smaller reductions.

Capital Gains Tax: Trump has previously expressed interest in lowering taxes on capital gains (income from investments like stocks). If this policy continues, it could benefit those with substantial portfolios, but may also widen wealth inequality.

Estate Taxes: Trump has also advocated for reducing estate taxes, which could help wealthier families pass assets on to their heirs, but would primarily impact those in top income brackets.

Economic Growth and Jobs

Job Creation: Trump’s first administration focused on policies aimed at stimulating job growth through tax cuts and deregulation, particularly in industries such as manufacturing, energy, and technology. While this may lead to job creation or wage increases, the benefits could vary significantly across sectors and income levels.

Immigration Policy Impacts: Immigration policies may have significant impact on the workforce across many sectors. Industries which rely on immigrant labor, such as agriculture and hospitality, may feel effects through labor shortages or changes in wage dynamics. Meanwhile, tech professionals with temporary visas may face uncertainty, affecting job security and career plans, although tax incentives may encourage job growth in the industry.

Trade Policy

Tariffs and Imports: Trump’s trade policies have focused on reducing trade deficits and bringing manufacturing jobs to the US. If tariffs on foreign goods remain or increase, it may raise costs for businesses relying on imports and for consumers, affecting personal spending. Efforts to strengthen domestic manufacturing could benefit certain industries.

Global Supply Chains: A second term may see continued efforts to reshuffle or disrupt global supply chains. This might lead to price volatility or shortages in certain goods or services.

National Debt and Deficit

A second Trump term might continue efforts to reduce the national deficit through spending cuts or tax reforms.

While these actions could create long-term financial benefits for the country, they could also have unintended consequences in the short term, such as slower growth or cuts to public services that could affect your finances.

Stock Market and Investments

Stock Market: Trump’s policies have historically been pro-business, and his second term may see growth in sectors such as energy, manufacturing, and technology, potentially benefiting investors. However, the long-term sustainability of such gains is uncertain.

Interest Rates: Trump has been critical of the Federal Reserve’s interest rate policies. If he continues to pressure the Fed to keep rates low, it could influence borrowing costs and savings rates. The impact on households is likely to vary depending on their specific financial situation.

Regulation and Environment

Trump’s administration has historically been focused on deregulation in areas like environmental rules and labor laws.

Deregulation: If his policies in this area continue, it could lead to more business-friendly policies that might positively impact the economy, potentially driving job growth or reducing costs in some industries. However, deregulation could also lead to concerns over public health or environmental quality.

Energy Costs: Trump has advocated for expanding domestic energy production, particularly fossil fuels. If this policy is pursued, it could lead to lower prices for gas and utilities.

Social Programs and Healthcare

Social Safety Nets: Trump has proposed reducing federal spending on Social Security, unemployment benefits, and other programs. While the level of cuts depends on broader budget negotiations, they could cause strain on those who are dependent on these services, particularly during economic downturns.

The Affordable Care Act (ACA): Trump previously sought to repeal or replace the ACA (Obamacare). If these efforts continue, it could result in higher costs for individuals relying on the marketplace for insurance, while those covered through their employer may see fewer changes.

Medicare and Medicaid: Trump has proposed budget cuts to Medicare and Medicaid in the past, which could affect access to these programs, affecting retirees and lower-income families.

Student Loans: Trump has made no secret of his opposition to student loan forgiveness, and lawsuits filed by Republican governors blocked some of the Biden administration’s debt-relief initiatives.

While the Trump administration’s position raises questions about the future of loan-relief programs, it shouldn’t affect loans that have already been forgiven.

Impacts on the Tech Industry

President Trump’s second term is expected to bring about significant changes characterized by deregulation, policy shifts in AI and cryptocurrency, alterations in content moderation practices, and evolving immigration policies.

Deregulation: The incoming administration’s tech appointments, such as Elon Musk to the new Department of Government Efficiency, indicate a trend towards deregulation. This approach could foster innovation, but may raise concerns around privacy and cybersecurity.

Automation Risks: Encouraging rapid technological advancement without safeguards could accelerate automation, potentially reducing demand for certain jobs.

How to Navigate These Changes

Regardless of where you stand financially or politically, it’s important to prepare for potential shifts:

Review Your Finances: Evaluate your savings, investments, and insurance coverage to ensure they align with your goals and risk tolerance.

Consult a Professional: A financial advisor can help you develop strategies tailored to your situation, whether you expect benefits or challenges from upcoming policy changes.

Stay Informed: Keep an eye on legislative developments and economic indicators to adapt your plans as needed.

Final Thoughts

President Trump’s second term brings the promise of significant changes to economic and financial policies. While some may benefit from reduced taxes and pro-growth initiatives, others could face challenges related to healthcare, social programs, or rising costs. By understanding these potential impacts and proactively managing your finances, you can better navigate any uncertainties ahead.

For those who are concerned with the possible impacts of Trump’s second term on their retirement provision, it may be tempting to focus on immediate or short-term events. However, for successful retirement planning, a longer view is essential. Your financial advisor can help you develop a plan designed to weather unpredictable economic events far into the future.

If you have questions about your specific circumstances, or want to talk about developing a financial plan to effectively address your goals and aspirations, please get in touch.

We welcome the opportunity to chat with you and wish you every success in the future.

Sam Gullette, CFP®, CLU®
Certified Financial Planner™

‘My mission in life is to help people take control of their money and avoid financial stresses. My clients are successful professionals and executives, many of whom are compensated heavily with company stock. Together we maximize their wealth-building opportunities, minimize taxes, and make sure their family is protected if life throws them a curveball.’

Erik Alexander
Financial Consultant

‘I work with professionals and executives who are compensated through various forms of company stock.  They have more money than time and struggle to balance the key aspects of their lives. Their decisions affect others, and they feel a huge responsibility towards making them wisely. I enjoy helping them solve their complex problems, and being counted on for their and their families’ financial wellbeing.’