Dec 9, 2024
Going into retirement with a solid nest egg is important given the long-term uncertainty around programs like Social Security — and also, because Social Security only replaces about 40% of the typical wage earner's income, and most retirees need more than that to live comfortably.
In fact, a recent Northwestern Mutual study found that Americans think it'll take $1.46 million to retire without financial worries.
Advertisement
If you're 63 with $509,000 in savings, you're clearly a ways off from $1.46 million. But your savings are much higher than many Americans in your age group. The average amount baby boomers and older Americans have saved is $120,300, per the study. According to Federal Reserve data, households of those 55 to 64 had average retirement savings of $537,000 in 2022, but you are close to that figure as an individual.
So you may feel comfortable enough, in theory, retiring from your job if you’re burned out and ready for that next phase of life.
That said, you may be worried about the impact of a Trump presidency on your income for the next four years. And without a crystal ball, it's hard to know what’s in store. But here are a few good things to know if you're contemplating a near-term retirement.
What a Trump presidency could mean for Social Security
If you're 63, you're eligible to sign up for Social Security right away. However, your full retirement age isn't until 67, so signing up immediately would mean reducing your monthly benefit. With a $509,000 nest egg, which is a decent amount of money but not a ton, you may want to hold off on claiming benefits for a few more years.
Meanwhile, Trump has talked about eliminating taxes on Social Security benefits. Currently, the income thresholds at which taxes on benefits apply are pretty low, so many recipients are subject to them.
On the one hand, not having to pay taxes on your Social Security income puts more money in your pocket. On the other hand, eliminating taxes on benefits could have negative consequences given that Social Security is roughly a decade away from exhausting its combined trust funds.
“President Trump’s proposals to eliminate taxation of Social Security benefits, end taxes on tips and overtime, impose tariffs, and expand deportations would all widen Social Security’s cash deficits,” said the Committee for a Responsible Federal Budget.
Advertisement
The nonpartisan, non-profit organization estimates that President Trump’s agenda would advance insolvency by three years, from FY 2034 to FY 2031, and lead to a 33% across-the-board benefit cut in 2035, up from the 23% the Congressional Budget Office projects under current law.
So stripping the program of that added tax revenue may not be such a great thing, even though it might work to seniors’ advantage initially.
Must Read
- Dave Ramsey warns nearly 50% of Americans are making 1 big Social Security mistake — here’s what it is and the simple steps to fix it ASAP
- Robert Kiyosaki begs investors not to miss this ‘explosion’ — says this 1 asset will surge 400% in a year
- Vanguard reveals what could be coming for U.S. stocks, and it’s raising alarm bells for retirees. Here’s why and how to protect yourself
Join 250,000+ readers and get Moneywise’s best stories and exclusive interviews first — clear insights curated and delivered weekly. Subscribe now.
What a Trump presidency could mean for taxes and investments
Trump will no doubt try to extend provisions of the 2017 Tax Cuts and Jobs Act scheduled to sunset at the end of 2025. He also wants to lower the corporate tax rate from 21% to 15% for firms that make their products in America. Corporate tax cuts could boost the stock market. That would be good news for retirees having to live at least partially off of their investments.
On the other hand, there's concern that Trump's tariffs and plans to deport immigrants could have a negative impact on the economy. His policies will reignite inflation, according to 16 Nobel Prize-winning economists who signed a letter about the issue. This means interest rates could rise again, reducing your purchasing power and making borrowing more expensive. If you're thinking of retiring now, assess your debts. You may want to hold off on ending your career if you still owe quite a bit on your credit cards or have a significant amount of debt on a whole.
If you'll be retiring at 63 and tapping your nest egg, an unstable economy could impact your investments and income. It's a good idea to shift toward more stable assets in retirement regardless of the political backdrop. One rule of thumb says to subtract your age from 110 to know how much of your portfolio should be in stocks.
Keep calm and maintain a balanced portfolio with the right asset allocation for your investing horizon. Try not to make any rash investing decisions based on the news, since no one can accurately predict what's going to happen, and stay focused on your long-term financial goals.
You May Also Like
- Turning 50 with $0 saved for retirement? Most people don’t realize they’re actually just entering their prime earning decade. Here are 6 ways to catch up fast
- This 20-year-old lotto winner refused $1M in cash and chose $1,000/week for life. Now she’s getting slammed for it. Which option would you pick?
- Warren Buffett used these 8 repeatable money rules to turn $9,800 into a $150B fortune. Start using them today to get rich (and stay rich)
- Here are 5 easy ways to own multiple properties like Bezos and Beyoncé. You can start with $10 (and no, you don’t have to manage a single thing)
Maurie Backman has been writing professionally for well over a decade. Since becoming a full-time writer, she's produced thousands of articles on topics ranging from Social Security to investing to real estate.
