How the Trump Administration Could Boost (or Tank) Your Retirement Savings
As President Donald Trump begins his second term, hot-button topics like immigration and tariffs have been in the spotlight. Retirement planning, not so much. But several issues will likely come into focus that could affect your retirement savings.
Trump has called for extending the Tax Cuts and Jobs Act, which passed in 2017, and massive new tax cuts, including an end to taxes on Social Security benefits. There’s been speculation that Trump policies could broaden access to cryptocurrency and pave the way for private equity investments in 401(k)s and other retirement accounts. As the Social Security and Medicare trust funds inch toward depletion, lawmakers are under pressure to enact changes to address both programs’ solvency.
Read on to learn how the new Trump administration could impact your retirement planning in 2025 and beyond.
Tax cuts’ impact on retirement savings
The Tax Cuts and Jobs Act lowered tax rates for most taxpayers and nearly doubled the standard deduction. Most provisions of the law are set to expire at the end of 2025, but the Republican-controlled Congress is expected to extend most parts of the law.
Whether you’re working or retired, lower income tax brackets mean you get to keep more money in your pocket. Putting current tax savings toward a retirement account is a smart way to build up your nest egg for later.
But the question of how the administration will pay for these tax cuts lingers. Trump has proposed replacing income taxes with tariffs, along with enormous cuts in spending — both of which have drawn skepticism from some economists and policy analysts. Some experts warn, though, that Trump’s policies could lead to higher inflation and stock market volatility.
Social Security solvency
Trump has pledged additional tax cuts, including an end to taxes on tips and Social Security benefits.
Social Security has been paying out more than it collects through payroll taxes since 2021. The Old Age and Survivors Insurance trust fund, which pays benefits to retired workers and their survivors, currently has enough money to pay out full benefits through 2033, according to the latest projections. After that, the trust has only enough to pay 79% of scheduled Social Security benefits unless Congress takes action.
Trump’s campaign platform said he would “fight for and protect Social Security and Medicare with no cuts” and opposes increasing the full retirement age, currently 67 for anyone born after 1959.
The Committee for a Responsible Budget estimates that Trump’s plans to end taxes on Social Security benefits, overtime and tips, impose tariffs, and pursue large-scale deportations would create a $2.3 trillion deficit for Social Security over the next 10 years. The nonpartisan think tank projects that these plans would lead the OASI to run dry three years earlier, by 2031 instead of 2034.
Eliminating the Social Security tax would benefit current retirees, letting them keep more money. However, the president hasn’t offered any specific plans for shoring up either program’s finances for future generations.
Expanded access to alternative assets
In early 2024, the US Securities and Exchange Commission approved the first bitcoin exchange traded-fund, broadening access to cryptocurrency in retirement accounts. So far, though, crypto makes up less than 1% of retirement access.
One reason is that retirement plan administrators are fiduciaries. That means they must act in the best interest of plan participants and exercise caution in choosing investment options, and cryptocurrency is considered a volatile investment.
Trump vowed during his campaign to become the first “crypto president” and has also suggested creating a Bitcoin reserve. The administration is also expected to loosen regulatory restrictions. Many in the financial industry believe the administration could pave the way to broader access to cryptocurrency, along with other alternative assets, like private equity, in retirement accounts.
Barry Spencer, a financial adviser and CEO of Wealth With No Regrets in Alpharetta, Georgia, suggests caution with such investments.
“Bitcoin, crypto and private equity can be beneficial in a retirement portfolio as long as there is a clear understanding of the volatile nature and timeline for expected results,” Spencer said. “In no way should money that might be needed in the near term — within seven to 10 years — be allocated to crypto or private equity.”
Raising RMDs
RMDs, or required minimum distributions, are mandatory withdrawals from retirement accounts funded with pretax money that begin at age 73. The longer you can delay RMDs, the more time your money has to grow before you start taking taxable distributions.
Trump hasn’t said much recently about changes to RMDs. However, in 2019, he signed the Secure Act, legislation that increased the RMD age from 70½ to 72.
President Joe Biden later signed the Secure Act 2.0, which pushed the RMD age back again from 72 to 73. Under the Secure Act 2.0, RMD age will increase to 75 in 2033.
Should you change your retirement strategy?
Regardless of policy changes, experts advise against relying solely on Social Security benefits for covering expenses in retirement. Mindy Yu, director of investing at Betterment, believes that investing for retirement is especially important given the uncertain futures of both Social Security and Medicare.
“We definitely encourage thinking about diversifying how you’re saving for retirement and greater access to 401(k)s and IRAs because Social Security is going to face reductions by [almost] 25%,” she said.
If you’re worried about how all of this will affect your retirement accounts, remember that investing for retirement is a long-term game.
Yu cautions against shifting your investment strategy in response to market uncertainty. Instead, she recommends using the dollar-cost averaging method — where you invest a fixed amount on a regular schedule, regardless of market performance — and contributing enough to retirement accounts, like a 401(k), to get your full employer match.
“Time in the market is much more important than trying to make some of that short-term timing,” Yu said. “With the new administration, some of the tariffs might not be fully realized. These can be negotiation tactics. When there’s so much uncertainty, it’s hard to position yourself.”
As for Medicare, she suggests saving now for future health care expenses. For example, a health savings account, which allows for tax-free distributions as long as the money is used for qualified medical expenses, can be a valuable tool.
“While you still have an income, you do have resources that your employer provides,” Yu said. “Definitely take advantage of what’s offered there before you’re in retirement and lose access to some of these programs.”