How will the Election Results impact your Retirement? Ep 130

Hear some of our clients top questions on how the election results will impact their financial portfolios, what to look out for, and ways you can help insulate yourself for a successful retirement. 

Episode Transcript

SPEAKER_01 (00:00):
Welcome back to the Excel in Retirement podcast,
where we help good people makewise financial decisions so that
they may excel in retirementwith confidence.
Learn more at clientsexcel.com.
Now to your host, David Treese.

UNKNOWN (00:18):
David Treese.

SPEAKER_00 (00:23):
Welcome back to episode 130.
I am joined with Felicia Pageand we are going to be talking
through some stuff.
What are we talking about,Felicia?

SPEAKER_02 (00:32):
All right.
So obviously we just had apretty monumental election here.
And so that's what we're goingto be talking about is the
election and basically howthat's going to be impacting the
financial industry in general.
And especially for all of ourclients, we definitely focus on
retirees and there's several bigkey points that we really want

(00:55):
to bring to their attention.

SPEAKER_00 (00:58):
Okay, great.
What are we going to talk about?

SPEAKER_02 (01:00):
Well, so we're going to first talk about basically
what are some of the majorquestions that a lot of our
clients are looking at.
We're going to talk about theTax Cuts and Jobs Act.
That's potentially up on thechopping block for next year.
Some retirement savings, socialsecurity, government spending,
and I think you also mentionedsome tariffs as well.

(01:23):
And we're going to talk aboutmaybe a few different solutions
that we can be looking at tohelp protect our clients' money
like Roth conversions.

SPEAKER_00 (01:31):
Okay, cool.

SPEAKER_02 (01:32):
So let's jump into it.
First and foremost, we've gotTrump's Tax Cuts and Jobs Act,
which obviously was originatedin 2017.
So tell us a little bit moreabout that, kind of where it's
at, what it's kind of meant forour clients, and what the
potential outlook looks like.

SPEAKER_00 (01:52):
Yeah, we saw some major legislative happenings
when it comes to retirementaccounts with the 2017 Tax Cuts
and Jobs Act and then the SecureAnd so what happened, and we
talked about this a good bitover the last few years, is
those tax cuts were enacted in2018.

(02:15):
And so in order to get thatthrough Congress, they
negotiated a sunset of that.
And so at the end of 2025,legislatively right now, the Tax
Cuts and Jobs Act is set toexpire.
And so what that means for mostpeople is that if you pay taxes,
our taxes are going to go up alittle bit because we saw the

(02:36):
standard deduction go up prettyhigh.
And then we saw the thethresholds decrease.
And so that is set to, ifnothing happens to sunset at the
end of 2025, and then in 2026,we will go back to those old tax
brackets.
And so Trump has talked in hiscampaigning about extending the

(03:01):
Trump tax cuts.
And it's my understanding thatwhen We enacted the tax cuts
that sent the deficit up over atrillion dollars a year at that
point.
And so I don't know if it'sgoing to be possible.
I don't think anyone knows ifit's going to be possible from a
mathematical standpoint toextend the tax cuts and jobs

(03:24):
act.
I'm sure the government tends,in my opinion, to get pretty
creative with their accounting.
And so they probably could getsomething figured out.
But at the end of the day, we'restill, what is it, 37 I've got a
nifty little app on my phoneshowing the national debt in
real time, and it's about$36trillion.
We're going on$36 trillion.

(03:44):
We're at$35.9 right now.
And so at some point, we have tofigure out what to do about our
debt, and that is a challenge.
As more and more baby boomersare retiring, there's not enough
workers coming into theworkforce to pay taxes since the
generation behind them is not aslarge.

SPEAKER_02 (04:07):
Certainly.
And that's something that wewere going to kind of talk about
as well is basically thegovernment spending.
So that's another point, justsince we're kind of segueing
into that.
Essentially, you know, what arethe thoughts with Trump being in
office on the overall governmentspending and how that's going to
affect everyone?
I

SPEAKER_00 (04:26):
mean, the thing I'm most excited about is Elon Musk
and Vivek coming out with theDepartment of Efficiency or
however they're saying it.
And musk seems to think thatthey can cut the budget by two
trillion dollars which thatwould be incredible to see that
happen and so you know it'spretty wild all the things that

(04:50):
trump is already saying and theswift pace at which he's moving
with uh i think i saw that he'stalking about doing away with
the department of education andsending that back to the states
and there's just a list thatgoes on and on what trump did in
his first term is deregulatequite a bit.
And that's what Elon's mandateis for this new department or

(05:12):
temporary department that he'soverseeing is to deregulate,
which tends to make it easierfor businesses to operate
because there's less complianceneeds there and less regulatory
pressure that takes away fromproductivity.
And so the economy is probablygoing to grow, Lord willing, and

(05:32):
that will be a great thing.
And Trump figures that we can dothat.
This is me, my My reading intowhat he's saying or explaining
what I think he is saying isthat we can afford to do the Tax
Cuts and Jobs Act and extend itbecause he's going to
deregulate, which is going tomean more money is coming into

(05:53):
the government coffers becausethere's going to be more money
earned and more tax revenue.
And so that is his ambition, Ido believe.

SPEAKER_02 (06:02):
excellent yeah that's essentially I've got a
couple of notes here from arecent webinar that we've looked
at and essentially what they'resaying is Americans are
essentially underpaying for thecurrent government that we
currently have some statisticsthat they were reflecting were
that our country brought in 4.4trillion dollars in revenue and
spent that exact equal amountjust on mandatory

(06:24):
non-congressional spending alone

SPEAKER_00 (06:26):
yes

SPEAKER_02 (06:27):
so again

SPEAKER_00 (06:28):
kind

SPEAKER_02 (06:29):
of lending to programs like social security
and medicare

SPEAKER_00 (06:32):
Yeah, and we would be happy to send you the notes
we're looking off and whatFelicia is referencing there.
If you just want to email us athello at clientsexcel.com, we
would certainly be happy toemail over the report she is
referencing.

SPEAKER_02 (06:46):
Yeah, but so again, kind of talking about Social
Security, I think that's anotherbig thing.
You know, retirement and SocialSecurity is something big that
we're dealing with often here inour office.
So can you speak a little bit onthat in terms of what the new
legislation maybe looking at interms of these two different
areas?

SPEAKER_00 (07:06):
Yeah, it's pretty crazy that we pay taxes on our
social security to pay into itand then we get taxed again when
we take it out.
It almost seems like doubletaxation, but I am not an expert
on that.
So it was a Republican in thatRonald Reagan in the early 80s
with Tip O'Neill, the Democrat,got together and started taxing

(07:28):
social security.
And I believe, if I recallcorrectly, that was enacted into
law around 19 And we startedtaxing retiree social security
payments.
And the thought process was totry to make it solvent, the
trust fund solvent for all of uscoming behind them.
And so now President Trump hassaid that he would like to quit

(07:50):
taxing Social Security.
The challenge we have is in2034, the trust fund put out a
report or ssa.gov.
You can go read it there.
I believe that by 2034, theywill not be able to pay full
benefits at the current level ofmoney that they're bringing in.

(08:10):
And so I believe it was either78 or 79 cents for every
scheduled dollar in 2034.
And so we've got, we're on atrain, so to speak, and we're on
a train that's sort of out ofcontrol, in my opinion.
And there's the tracks just dropoff here at the end of the
track.
There's no continuing on withwhere it was at.

(08:32):
So obviously now is the time tobe figuring out how to shore up
the Social Security Trust Fund.
And what we're projecting is inthis report that we're
referencing, there's about 51billion in revenue that's
generated from social securityand so where are we going to get
that money from to make theprogram keep going i don't know

(08:54):
i hope we can do it that wouldbe a huge quality of life
enhancement i feel like for ourclients if that was not taxed
but again i think it just comesdown to a math problem and and i
would love to have sometransparency around how we're
going to do that

SPEAKER_02 (09:10):
For sure.
I can't believe that we're thisclose to this 2034 deadline that
we're looking at, and itliterally hasn't even been a
topic of discussion.
So, interesting.
One of those other kind of areasor questions that they've been
looking at is retirement savingsand the taxation of that,

(09:30):
especially for those who arepotentially wealthier Americans.
So, obviously, with Trump, Iimagine his...
perspective on that is certainlyto not do that.
But what are your thoughtsthere?

SPEAKER_00 (09:44):
Well, I think it's inherently un-American to
demonize success.
And there has been a movement inour country for some time now to
penalize people or want topenalize people that have been
successful.
And I personally feel likethat's repugnant.
And so there's been this vaguelanguage about taxing people

(10:08):
more that have been able to savefor retirement and so forth.
And you hear things thatOccasionally floated in the news
about means testing, whetherpeople get social security or
not.
And I wish we would spend morein our educational endeavors to
educate Americans about theopportunities we have in our

(10:30):
country to do better.
And other countries do not haveas many opportunities as we
have, but there are so manyexamples of people being able to
better themselves with a sidehustle or starting a business
like we have done here.
here to serve other people andhow you get rewarded for that.
And it is challenging when thegovernment demonizes success and

(10:55):
pits people against each otherultimately.
And so I hope if Trump doesnothing else, he is able to roll
some of that hostility andmentality away from government,
roll that back and not have thatas a thing because that is
certainly no way to getproducers to continue producing.

SPEAKER_02 (11:17):
Absolutely.
It's kind of that American dreamthat certainly has been the
foundation for us here.
Well, there's one other topicthat we want to talk about
before we kind of dive into somesolutions and things to look at,
and that would be the tariffsthat Trump has proposed.
How do you think that is goingto really affect all of our

(11:38):
individuals in the financeindustry?

SPEAKER_00 (11:40):
Well, I have to say I'm not an economist.
Right.
It seems like Trump was intoentertaining the idea, it seems
like I've heard this since theelection, of entertaining the

(12:01):
idea of doing away with incometaxes and just using tariffs.
And again, I don't think thatmathematically could work.
You know, we did not see highinflation until Trump left
office and we had tariffshappening then.
I think that it's inherentlyunfair the way other countries
take advantage of us.

(12:22):
This is my opinion.
And we pay unequally weightedamounts to things like NATO and
various organizations like thatfor other countries.
And so Yeah, absolutely.

(13:06):
thing for our economy and givingpeople the ability and the
opportunities to have jobs andto better themselves.
What that does for inflation, Idon't know.
It could go up.
And that's the million dollarquestion, right?
And then what happens withinterest rates?
Trump put a lot of pressure onthe Fed to lower rates in his
first term, and he probably willagain, if I had to guess.

(13:27):
And so if inflation goes up,it's going to be very hard for
the Fed to lower rates, Ibelieve.
But that is something we'll justhave to wait and see.
wait and see I feel like

SPEAKER_02 (13:37):
it's definitely going to be a lot of wait and
see but certainly these are justkind of some big topics that
have been something we've beenhearing a lot of so ultimately
you know Trump is going to onlybe in office for another four
years we know this right soultimately a lot of our clients
are looking at you know atrajectory or a vision way past

(13:59):
four years yes and so you knowwhat are some different things
how are some how can our clientskind of insulate themselves to
be able to maneuver across allof these different potential
legislative changes or maybethey're good for a little while
longer and maybe they're not.
But what are some things thatthey can do to kind of help

(14:20):
insulate themselves?

SPEAKER_00 (14:21):
Yeah, we've had two really good years.
This year and last year havebeen really good in the market.
But at the end of the day, whenwe are in retirement, we want to
have an all weatherprooffinancial plan.
And so we want to be able toprosper in the good times and be
less impacted in comparison tothe overall stock market when

(14:43):
the bad times happen.
So what I really mean is we wantto switch from an accumulation
stance to an income anddistribution.
If we are trying to hit homeruns when we're 30, 40 years old
in our accounts, we have to beokay with striking out
occasionally too.
And striking out in ourretirement accounts means maybe

(15:04):
losing 25 or 30 percent of ourmoney.
And we have the benefit whenwe're younger of a long time
horizon to make up those losses.
But when we get to a point wherewe could possibly start
distributions out of ouraccounts or we don't have as
long of a lifespan topotentially make up for big
market problems, we want totransition to trying to hit base

(15:26):
hits.
It's a lot easier to hit a basehit and get on base and circle
the bases than it is to hit ahome run.
And so what that looks like isperhaps taking a little less
risk with our accounts and soforth.
Occasionally we meet people andThey love the way their accounts
have been growing and it's verydifficult for them to switch to

(15:48):
an income and distributionstance.
But at the end of the day, Oncewe do some math and we figure
out what you're trying toachieve with your accounts and
the type of income level thatyou want, we kind of get to a
point where we've made it.
We've hit our success and wedon't need to keep pushing the
envelope to have more successand take more risk.

(16:08):
It becomes somewhat unnecessary.
And so we know we need money inthe market throughout our
lifetime to protect ourpurchasing power because the
market is the best hedge againstinflation for most people.
And so we need to It's the mostaccessible hedge against
inflation because the markettends to keep up with inflation
and exceed it.

(16:29):
And so what we want to do iscreate an all weatherproof plan.
And we don't know.
You know, Trump's first term, wehad COVID and things were
volatile and the market wentdown over 30 percent at one
point.
And so the market very well, forall I know, could go down 40
percent in the next year or two.
It could prosper.
It looks like things are goingto go well, but we don't know.

(16:51):
And so the point is is we wantto transition to an all
weatherproof plan so that we canhave the best likelihood of you
being able to maintain yourstandard of living in retirement

SPEAKER_02 (17:03):
Absolutely.
And that's basically, I mean,the core of what we do as a
business in general, right?
Even when things

SPEAKER_00 (17:15):
are good, we still were saying the same thing to
everybody we sat down here atthe table.
playbook for how we help folks.
And we would be happy to get acopy in the UPS to you.

(17:38):
You can just email us at helloat clients, excel.com.

SPEAKER_02 (17:42):
Fantastic.
And just one final note.
Um, I know we talked a lot abouttaxes today.
Um, that's been something kindof a lot of people are concerned
about.
And certainly, you know, like Iwas saying with us underpaying
for the government that wecurrently have, we basically
have this kind of impending, uh,potential rise for taxes in the

(18:02):
near future.
And so a buzzword that we'vekind of been hearing a lot of is
Roth conversions.
Can you talk a little bit aboutthat and what benefits that
might have?

SPEAKER_00 (18:11):
Yeah.
So if we're over the age of 59and a half, we can begin
distributions out of ourqualified retirement accounts,
like our 401ks and IRAs.
And so if we have an IRA, atraditional IRA that's never
been taxed, the government willallow us to pay taxes before we
have to.
So Uncle Sam always has his handout and he's ready to receive

(18:33):
taxes if we want to prepay orpay before it's necessary.
What we've been doing for yearsnow is taking money out of our
tax-deferred accounts andputting some of it in a tax-free
account.
And so the reason we might dothat is if taxes go up.
But I believe if taxes stay justas they are right now, that we

(18:57):
would be benefited by goingahead and paying some of the
taxes now so that we can get itto a tax-free position.
And that doesn't have to beeverything.
Every dollar we hold inqualified accounts is ultimately
whatever you're comfortablewith.
But I think most people would bebenefited by doing this.
And so there's obviously a lotof nuance to this.

(19:18):
And we want to work closely witha tax preparer to make sure
we're making good decisions andnot having any secondary effects
to our decisions as far asunintended consequences.
But I think that it isbeneficial to have tax-free
money because our government hasnot been a good keeper of our

(19:38):
fiscal house.
And so we have some softwarewhere we can analyze the tax
return and figure out where youare with your effective rate and
so forth and figure out how muchroom you have in your current
tax bracket.
And so this is often easier forfolks as they're transitioning
into retirement and maybe theirwork income is going away.

(19:59):
But if that's many years out foryou and you love working, I
would not put off that justbecause we're still working.
It's still a conversation worthhaving.
And at the end of the day, withthat qualified account, either
you or your spouse or whoeverinherits your funds is going to
pay taxes on it.

(20:20):
And so at what point are youokay with the taxes being due?
Do you want to defer that toyour children for them to figure
out?
Some people are fine with thatand they figure that that's a
blessing to their kids and theycan deal with that problem or Or
would you like to empower themwhere they get a tax-free
inheritance and your money thatyou worked so hard for could

(20:41):
potentially be extended and theycould keep more of it in their
pocket?
I personally would love to seethat happen for my children, and
so that's what we help folks do.
That is how that works,typically, in a nutshell.
Does that answer your question,Felicia?
It

SPEAKER_02 (20:58):
does, absolutely.
And again, just to reiteratethat it is a case-by-case basis,
right, with these Rothconversions.
We really need to analyze thefull picture here.

SPEAKER_00 (21:07):
There's nuance to it, and that's not appropriate
for everybody.
Absolutely.

SPEAKER_02 (21:11):
Good deal.
Well, any other final notes onthe election and what the
potential forecast looks like?

SPEAKER_00 (21:18):
I think the biggest takeaway is that the news and
all the pollsters really got itwrong, and And we were told that
this was going to be a supertight election, and it really
wasn't.
And so it just makes you wonderwhat we can believe, quite
frankly.

SPEAKER_02 (21:35):
Yeah, didn't they say Trump won the popular vote?

SPEAKER_00 (21:39):
Yes, first time in, what was it, 20 years?
I think so.
Yeah, Republicans won.
Yep, that's cool.
Thank you, Felicia.

SPEAKER_02 (21:46):
Yeah, absolutely.
Thank you guys so much.

SPEAKER_01 (21:49):
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(22:14):
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(22:35):
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