Three ways the U.S. elections could shape your financial future

Trying to time the market based on short-term dynamics (political or otherwise) is extremely difficult.

Likewise, making big changes to your financial plan based simply on what could happen as a result of an election, is risky too.

Hi, I’m Lindsay Theodore, a certified financial planner professional at T. Rowe Price.

We’re going to look at three areas where the U.S. elections in November could impact your personal finances:

• Income and Estate taxes
• Social Security
• And Health Care

Let’s start with income taxes.

Unless congress takes action, starting in 2026, tax brackets and rates will revert to 2017 levels, adjusted for inflation.

And the standard deduction could be cut roughly in half for most taxpayers.

Extending these tax cuts could meaningfully increase the federal deficit. Letting them expire however, could stretch the already tight budgets for many American households.

The child tax credit could be reduced or expanded depending on who controls the white house and congress.

Regarding estate taxes, again, unless congress takes action, the federal estate tax exemption will revert to about half its current total of $13.6 million per person, which could expose more families to estate taxes.

As for Social Security, the system could become unable to meet all of its obligations within 10 years unless congress takes action to shore it up.

But this uncertainty shouldn’t drive seniors to claim early unless it makes sense for their situation.

It’s unlikely that any changes will impact the expected benefits of those who’ve already paid into the system for many years and are close to claiming benefits.

As far as healthcare is concerned, marketing efforts and expanded subsidies have led to 10 million new enrollments in Affordable Care Act plans since 2020.

However, unless congress acts, these increased subsidies are set to expire in 2025.

The Inflation Reduction Act gave Medicare the power to negotiate drug prices with manufacturers, and older Americans are already starting to realize cost savings as a result.

While both presidential candidates appear intent on reducing drug prices for seniors, they have very different views on how to make that happen.

The Bottom Line: Remember that what a candidate says on the campaign trail can vary greatly from what they might actually accomplish in office. While investors should be aware of the critical decisions facing policymakers, they should be cautious about making any preemptive decisions based simply on what could happen.

We believe that investing and planning decisions should be based on longer term fundamentals and your personal situation, not near-term political outcomes.

We’re here to help.

Thank you.