Will you be better off in four years? Experts offer tips to navigate a new administration

As the country readies for a January transition in Washington, millions of Americans wonder what the next four years could bring for their finances.

A significant shift in U.S. politics has wide-ranging implications for tax policy, finance, and the economy. This news could bring delight or despair depending on one’s political leanings.

The danger for Trump supporters is that their exuberance leads to overexposure to risky assets, such as Bitcoin, which has boomed since his victory. Meanwhile, his detractors risk becoming overly pessimistic, needlessly withdrawing from the market, and missing out on potential gains in the coming year.

Emotional decisions based on political preferences rarely make financial sense. Historical data shows the market has generated roughly similar returns regardless of which party is in power.

That doesn’t mean investors can ignore politics completely.

Instead, it’s essential to see past the current hysteria or euphoria and assess the new administration’s policies and their likely impact, a clearer picture of what the next four years hold. Expert input can make a difference.

Financial planners give their take on what a second Trump presidency could mean for their clients’ bottom lines.

Second Time Lucky?

Many remember Trump’s first term as a robust economic period, exempting his final year when the COVID-19 pandemic struck in 2020. Previously, Trump cut corporate taxes, raised tariffs on imports, and rolled out policies to make American companies more competitive and make the U.S. more business-friendly.

If the past is prologue, that means a likely slimming down of the finance rule book.

“If Trump’s previous term was any indicator, another round might mean more deregulation in our space that could make it easier to navigate some of the industry’s red tape,” says Jason Berube, Founder of Cornerstone Financial & Insurance Services. “Though with a side of unpredictability that keeps us all on our toes,” Berube adds.

Taxes and Tariffs

The 2017 Tax Cuts and Jobs Act (TCJA), one of Trump’s signature economic initiatives, will expire next year.

The fate of the TCJA could impact middle America’s bottom line. According to the House Committee on Ways and Means, the average family of four making the national median income will see a tax hike of $1,695 if the act is not extended.

Some advisors see an even bigger upside for high-networth individuals (HNIs). “Ultra high net worth households can now breathe a sigh of relief,” says Dale Hershman, Principal of SickAdvisory Services. “Specifically, it’s likely that much fewer families will now face an inheritance tax.”

The TCJA of 2017 doubled the exemption limits for Federal Estate Tax. After this temporary tax cut, the exemption jumped from $14.3 million per married couple to $28.6 million.

Michael Rosenberg, Founder of Diversified Investments, believes these moves could benefit many.

“As with any tax reduction, these policies could increase discretionary income, giving people more freedom to spend or save,” says Rosenberg. “Younger individuals may have a greater capacity to save for retirement or their first home, while retirees could use the additional income to bolster emergency funds or enhance their lifestyle.”

However, he warns that implementation requires negotiation. Social Security exemptions, Rosenberg points out, may come with income limits to ensure higher earners contribute fairly.

Trump has also proposed various tax measures aimed at lower-income earners, such as scrapping tax on tips and tax-free social security.

“Trump’s plan to eliminate taxes on tips may offer relief to hospitality workers, but this policy alone is unlikely to have a broad economic impact,” says Jason Gilbert, Founder of RGA Investment Advisors.

Over Budget?

Trump’s policies could let people keep more of what they earn, but with the U.S.’ enormous deficit, can the government afford to go on despite that lost revenue?

The U.S. National Debt has now surpassed an eye-popping $35 trillion and shows no signs of slowing. Servicing a debt of this magnitude wastes enormous capital. For the first time, interest expenses required in fiscal 2024 exceeded the trillion-dollar level.

“Lower taxes and high national debt? It’s not exactly an easy balancing act,” says Berube. “Tariffs could be one way to offset things, but that’s a slippery slope with potential costs for everyone.”

One recent Peterson Institute for International Economics report estimates Trump’s proposed tariffs will cost the typical U.S. household more than $2,600 a year.

“The reduced tax base will not help fund the deficit; in fact, it will make it worse,” says Yohance Harrison, Behavioral Financial Advisor of Money Script Wealth Management. “Tariffs could be a great short-term solution; however, the long-term impact of tariffs will most likely mean higher prices for consumers, but I’m not in the business of making predictions.”

Rather than rampant speculation, everyday investors must move past the shifting macroeconomic data and focus on the elements they can control.

“Americans should focus on their personal balance sheets and fiscal policies,” says Harrison. “We cannot prepare for all outcomes, but we can make a plan for most.”

To see long-term gains, investors must look beyond the electoral cycle and adopt a broader investment horizon. Experienced financial advisors whose careers spanned many administrations remind clients to view the next four years as a brief moment in their portfolio’s lifetime.

The second Trump administration will have far-reaching impacts on various sectors of the economy. It could be a boon for certain players, such as small business owners or the cryptocurrency ecosystem. Amid the shifting political landscape, Americans must prepare for all seasons.

Prudent financial actions and consistent long-term investment in time-honored asset classes like stocks and property are usually recipes for success. Every investor will need to take a strategic, measured approach to the next four years.

This article was produced by Media Decision and syndicated by Wealth of Geeks.