Will the 2024 Elections Impact Your Retirement?

Check out Jeremy’s latest podcast on retirement planning by listening on “Apple Podcasts” or “Spotify Podcasts” or read below about Navigating Elections, Tax Changes, and Social Security Uncertainties.

Summary:

[169] – You’re not the only one wondering, “Will the next election significantly impact my finances?”

In this episode, Jeremy Keil explores the potential impact of the 2024 elections on financial markets and, more importantly, your retirement plan. Tune in to gain answers to the question “Will the 2024 Elections Impact Your Retirement?”. Learn how to NOT get caught in the political whirlwind — so you can make rational financial decisions.

Jeremy discusses:

• Why you shouldn’t fixate on market reactions to an election (based on historical data)
• How to proactively plan for the tax law changes expected in 2026
• The truth about the 2034 projections of Social Security Trust Fund reaching zero
• The importance of focusing on what you can control
• And more

Navigating Elections, Tax Changes, and Social Security Uncertainties

When we plan for the future, there are uncertainties. When there are uncertainties, people tend to make emotional money choices that they may regret later.

How can you avoid this common mistake? By planning ahead and focusing on what you can control!

Let’s take a look at some looming events that our clients most often ask about.

2024 Elections:

Every time an election year is on the horizon, people start to worry and get caught up in the political whirlwind.

Historical data has shown that overly fixating on market reactions to an election can be a huge mistake and may cause you to make irrational investment decisions. The article by Forbes Advisor titled How Do Elections Affect The Stock Market? effectively showcases how election years have had little correlation with market performance. Consider this market return data over the past 60 years (i.e., 15 presidential elections):

• Average Performance Over 12 Months Before Election Date = 8.4%
• Average Performance Over 12 Months After Election Date = 9.3%
• Average Calendar Year Annual Return, S&P 500 = 8%

This data shows that elections and their outcomes have little impact on stock market performance.

Even when there is a drastic rise or drop in the markets following an election year, it is often because of an unrelated reason. The drastic market drop during the early 2000s (after George W. Bush was elected) was attributable to the tech bubble burst and the 9/11 tragedy. The sharp market increases in 2009 (after Barack Obama was elected) and 2020 (after Joe Biden was elected) were mainly because of the markets recovering from the Global Financial Crisis and COVID-19 respectively. The elections alone would likely not have caused these trends.

That’s why we encourage those planning for retirement or making investment decisions to focus on what they can control — and politics is out of our control!

2026 Tax Law Changes:

In 2026, crucial tax law changes are expected as the laws set in 2017 are set to expire on December 31, 2025. Mainly, the tax rates are scheduled to go up and the limits for standard deductions are scheduled to go down.

It’s important to utilize the time we have in 2024 and 2025 to proactively plan for the looming tax law changes. This involves analyzing your current tax situation and leveraging potential tax advantages before the changes take effect.

A common example is to plan your taxable income such that it is higher during years with low tax rates, and lower during years with a high tax rate. This can be done by creating long-term projections and strategically timing your Roth conversations. For more information, check out our other podcasts about tax planning.

The Future of Social Security:

In about 10 years from now (~by 2034), the Social Security Trust Fund is expected to reach zero.

This does NOT mean Social Security is going away entirely. Even when the trust fund reaches zero, Social Security will have enough revenue to pay out around 77% of its promised benefits (in other words, 77 cents on the dollar).

Now, we understand that no one likes a 23% pay cut. However, it is important to dispel the myth that Social Security is going away completely because that myth may cause people to make some hasty, panic-driven decisions. When you create spreadsheet projections of your retirement income, assuming a 23% pay cut versus a 100% pay cut in Social Security can make a massive difference.

Plus, this isn’t the first time such a projection has been made. Social Security faced a similar situation in 1983. Can you guess when the Congress acted upon it? Just a few months before the Social Security Trust Fund was expected to run out of money! So, even though 2034 seems close, we may not see any near-term legislative action to ensure the fund’s sustainability.

In conclusion, there will always be some uncertainty while planning your retirement, and proactive action is better than knee-jerk reactions. To learn more about retirement planning, check out the resources below!

If you have any questions, feel free to contact us using the contact information provided below!

Resources:

• “How Do Elections Affect The Stock Market?” by Forbes Advisor
• Free Retirement Planning Video Course: 5stepretirementplan.com
• 3 Things You Should Know Before Choosing A Financial Advisor
• 7 Questions That Could Make or Break Your Retirement
• Subscribe to Retirement Revealed on Google Podcasts
• Subscribe to Retirement Revealed on Apple Podcasts

Connect With Jeremy Keil:

• Jeremy@keilfp.com
• 262-333-8353
• Keil Financial Partners
• LinkedIn: Jeremy Keil
• Facebook: Jeremy Keil
• LinkedIn: Keil Financial Partners
• YouTube: Retirement Revealed
• Book a call with Jeremy

Disclosures:

Content

Results and figures presented within the above links are hypothetical, unaudited and are intended for illustrative purposes only.

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No Tax Advice

Keil Financial Partners does not provide any tax advice. No information or results from the links should be interpreted as tax advice. Please seek guidance from a qualified tax professional for any and all tax-related matters.

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Investment Risk

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General Disclosure

Advisory Persons of Thrivent provide advisory services under a “doing business as” name or may have their own legal business entities. However, advisory services are engaged exclusively through Thrivent Advisor Network, LLC, a registered investment adviser. Keil Financial Partners and Thrivent Advisor Network, LLC are not affiliated companies. Please visit our website www.keilfp.com for important disclosures.