Make Sure Your Retirement Plan Can Survive Any Political Climate


In any era, the uncertainty over the future political climate is undoubtedly a factor when planning for retirement. Governmental fiscal policies, the party in power and its economic agenda, and new or proposed legislation can affect the economy to varying degrees.

And those changing dynamics can lead to confusion and anxiety among people trying to make the right decisions toward their future retirement income.

One piece of advice: Don’t make a rash decision based on the present political climate. It’s prudent to seek a financial advisor or retirement planner to thoroughly go over the impact of policies – such as The Tax Cuts and Jobs Act – and wise options to consider long- term toward your retirement goals.

That may require some short-term adjustments, but always with the goal of sustainable stability for your golden years in mind. And with that big-picture context, investors should stay focused on the long term and not get overly reactive to what’s happening in Washington.

Against the backdrop of uncertainty, there are some close-to-givens that investors can think about in regard to the political climate and how it may affect their finances. That understanding of trends and correlating results can provide a baseline from which people can plan or adjust their routes to retirement revenue.

  • A pro-business/private sector White House administration typically means periods of economic growth. As regulations are relaxed, not eliminated, such as for lending money, businesses can spend less money in red tape and more money on innovation and hiring. Tax cuts, for example, enable corporations and small businesses to use that extra cash to hire more people.
  • As companies have fewer regulations, potentially they can create more profit, which means they may price their stock higher. Thus, investors can make money from a less-regulated business environment.
  • Certain sectors can thrive from a certain stance a president takes. Pro stances in regard to manufacturing, for instance. Investors can reap the rewards by investing in entire sectors when there is a president who looks to improve such sectors.

The Tax Cuts and Jobs Act was meant to kickstart the economy with growth not seen in a decade. Six months in, the results are a bit lackluster. Business investment has increased only slightly throughout the last year (excluding oil and gas, which are highly volatile).

This raises the question: How much impact do administrative and fiscal policies have on the stock market, the overall economy, and by extension, your retirement planning? It may not be enough for the individual investor to make significant changes to a portfolio, as those with long-term financial goals like paying for college or saving for retirement are generally better off focusing on personal objectives.

Again, it’s a good idea to work with an experienced financial advisor, devising a strategy based on your personal tolerance for market risk, specific goals and investment timeline.

And remember: Just having money in a retirement account is of primary importance. The overall health of the market is what can wreak havoc on retirement plans; investment success ratios can come and go, and that’s often due to corporate decisions rather than government policies. But you, to a large degree, can control your simple savings for retirement.

Whatever the political climate, you don’t need to prepare for extreme changes in the wind speed and direction. Stay steady, seek good financial advice, and don’t let Washington dictate your overall retirement plan.

But if your emergency situation is dire enough – and you’ve exhausted other possibilities – then a 401(k) loan is worth taking a look at, preferably with some consultation from your financial professional.

 

By Christopher J. Dixon, Investment Adviser Representative
Oxford Advisory Group

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