The election finish line is almost here. By now, most of you have either voted or know which candidate you intend to vote for on Tuesday. The big question is when will the results of the election be known. Will it be soon? Or will lawyers and the Supreme Court need to get involved?
Whatever the results, regardless of which candidate prevails, I firmly believe we’ll see significant changes that will affect your pocketbook over the next four years. I say this not only because of the financial chaos created by the COVID-19 shutdown, but also because of proposed tax and investment changes.
And then there’s Social Security. Roughly 10,000 individuals turn 65 every day, so look for changes within the program to compensate.
Earlier this year many people suddenly lost their job. Small business owners and even some large corporations had to close their doors. Many have received assistance from Uncle Sam, but the downside of that action is the continued explosion of our national debt.
Another adverse consequence is that many have decided to retire from the workforce earlier than planned. And a significant number of them will likely apply for Social Security as soon as they’re eligible. That, of course, adds to the large segment of the population that’s receiving benefits at a time when fewer people are contributing into the program.
The Trustees have been warning us for years that Social Security is facing major financial issues. The large wave of retirees has accelerated those issues. That’s why, in the next few years, I anticipate changes for those in the workforce. Changes that will likely include additional dollars withheld for Social Security.
Then there are taxes. As they should, most people think of April 15 when taxes are mentioned. I suspect there will not only be changes to the tax tables but also on items such as the capital gains rate. If you’re not paying attention, you could be surprised when you receive even a small inheritance from mom and dad.
But don’t be surprised if there are also changes to retirement savings programs like 401(k) plans. The government’s need for revenue has already led to discussions about reducing their deductibility. To generate more tax revenue, changes have already been applied to Inherited IRAs. More such changes could be on the way.
Uncle Sam isn’t the only needy tax collector. Municipalities also have to make up for lost revenues. Be prepared for increases in such things as parking your car or going to the zoo, museum or library. Or even worse, having them all close down.
In short, be prepared to pay more. All levels of government have seen a decrease in tax revenue and desperately need more.
Surprisingly, however, in spite of the financial uncertainty, the University of Michigan Consumer Sentiment Index indicates that confidence is trending higher.
I believe that’s because, as a nation, we are resilient. We adapt to circumstances and we figure things out. So, if your candidate loses, don’t become too distraught. If your candidate wins, don’t think everything will be immediately solved.
What I can tell you with certainty is that the world is becoming more complex. And you’re going to need to pay more attention than ever to the ever-changing rules that affect your finances.