Ask an advisor: How can I Trump-proof my finances?

November 20, 2024 3:35 PM

President-elect Donald Trump has promised dramatic changes to trade and tax policy, worrying some investors.

Welcome back to "Ask an Advisor," the advice column where real financial professionals answer questions from real people. The topic can be anything in the world of finance, from retirement to taxes to wealth management — or even advice on advising.

Since Donald Trump won back the presidency, the stock market has been jubilant. The day after the election, the S&P 500, Dow Jones and Nasdaq indexes all reached record highs, with the Dow and S&P both clocking their biggest single-day gains in two years.

But not all investors are celebrating. Those who see Trump as a threat to democracy are deeply worried about the future of the country, including its economy. And those Americans are wondering how to protect their savings.

Voters tend to view Trump's economic record in one of two opposite ways. His supporters remember the relative prosperity of his first few years in office, ending abruptly in the spring of 2020. Trump's detractors, on the other hand, remember what came next: the historic COVID economic downturn, which produced the highest levels of unemployment since the Great Depression.

Whether Trump deserves the blame for that downturn is a matter over which Americans — as they are with many other issues — are sharply divided. Republicans largely view it as the inevitable consequence of extraordinary circumstances. Democrats, to a large extent, believe the crisis was exacerbated by Trump's mismanagement.

So for many investors, the former president's return to power is cause not for high hopes, but for anxiety. How can they safeguard their finances from a potential Trump crash? One person pondering this question is a social worker in New York. Here's what she wrote:

Dear advisors,

How can I protect my retirement savings from Donald Trump?

I'm a licensed clinical social worker in New York, and I'm terrified of what may happen to the economy under Trump's mismanagement. Will his tariffs reignite inflation? Will he tank the stock market, or go after Social Security or Medicare?

I can't know, but I want to be prepared. Right now I have about $300,000 in an IRA and about $100,000 in different savings accounts. I'm 64 years old, and at 67 I hope to partially retire and start collecting Social Security.

Should I move my savings to someplace safer — perhaps CDs, for example? If so, where? What should I do?

Sincerely,

Uneasy on the Upper West Side

And here's what financial advisors wrote back:

Don't panic. Plan.

John Power, certified financial planner and principal of

Power Plans

in Walpole, Massachusetts

Don't overreact to political posturing. And don't pay huge attention to those that intend to scare you with little knowledge of what really is to come.

What I suggest is doing some serious retirement planning. Make sure you know what life will cost you in retirement. Mr. Trump has said he wasn't going to cut Social Security and Medicare. Why believe otherwise? But position your assets you have accumulated so that you have a couple of years of need above Social Security set aside in a cash-type account. Your savings accounts probably do that. Then be sure your IRA is diversified.

Remember that the economy performed rather well under Mr. Trump prior to the COVID epidemic, which was not of his making. Bank savings and CDs do not grow enough to take care of your needs, but the economy has almost always recovered in two to three years. You still need to plan for the long term.

Make changes … but not financial ones

Jay Zigmont, CFP and founder of

Childfree Wealth

in Mount Juliet, Tennessee

The decision on making changes to your financial plan based on Trump can be a very personal one. No one can truly predict what will happen in the market. Start by looking at your personal situation and what may be impacted. As an LCSW, is your job likely to be impacted (i.e. is your funding at risk)? This may change your ability to partially retire, or force you into it. You may actually do better if some of his promises are kept, such as not taxing Social Security.

For my clients, we are not making any adjustments to their investments or savings based on Trump. We are working on safety plans for them, and addressing their biggest concerns, but it has resulted in very little change on the investment side but huge changes on the life side.

Think!

Kashif Ahmed, CFP and president of

American Private Wealth

in Bedford, Massachusetts

Donald Trump, or any president, doesn't personally affect your finances. Nor can they direct for that to happen. It is unwise to let your emotions and political feelings infect your portfolio and personal financial planning.

The American economy is vast and large enough so that one president cannot either derail it or make drastic course changes. Think of it like the Titanic. Just because the captain wants to make a U-turn doesn't mean it will happen right away. And don't forget that we have three branches of government and essentially a divided Congress.

Yes, tariffs and other things may lead to inflation. But the only thing that will ever beat inflation, and has for a very long time, is the broader stock market. Nothing else ever has. You should be more concerned about beating inflation and preserving your purchasing power as you ease into the next spending phase of your life. CDs and bank accounts may offer a (false) sense of security. Sure, the amount cannot go down, but if they don't beat inflation (and won't when the Fed is already cutting rates), then you really have negative rates of return. Think! Never let emotions dictate your financial decisions.

Politics and finances don't mix

Noah Damsky, chartered financial analyst and principal at

Marina Wealth Advisors

in Los Angeles

Performance of the markets and the economy is not highly correlated to the political party in the White House. Don't be so quick to think this time is any different, because you'd usually be mistaken.

If you feel this concern, it might be because you don't agree with Trump's perspectives, and that's perfectly OK. However, don't let your disdain for a president change how you handle your finances.

Perhaps you change small things, such as pretax vs. Roth retirement contributions because of potential changes in tax rates. A big mistake would be to change your investment approach, which should be able to handle booms and busts in stride. Your portfolio shouldn't be built on the expectation that markets and the economy will always be smooth sailing, because that's almost never the case.

Accept that you might be a bigger roadblock to your portfolio than any politician.

You might benefit from speaking with a professional to determine an appropriate asset allocation as you near retirement. This might give you peace of mind, regardless of which politician is at the helm.

Don't be your own worst enemy. Plan ahead, then stay the course. Don't get swayed by emotions.