Written by Quentin Fottrell
“My financial future worries me more than anything else.”
Greetings, Quentin
I have a $2,500 monthly mortgage with 15 years left on it.
I’m responsible for taking care of myself because I’m divorced and have no children. I’m not going to inherit anything. My parents were not wealthy. I have a few close pals (that circle has shrunk as I’ve gotten older), and one sister who is far away and has always been nothing but drama and problems. I make roughly $150,000 a year, and after taxes, I make about $110,000.
I’m a 54-year-old American who is rapidly approaching retirement. I’m trying my hardest to pay off my mortgage, keep my job for another ten years or more, and get back on my feet after a lot of ups and downs. I am a working stiff, to put it another way. The expense of living, paying my mortgage, and maybe some of my own arrogance are the main reasons I haven’t saved much during the last five years.
For the foreseeable future, I’m exclusively on my own side.
The election of Donald Trump has motivated me to tighten my control over my own household budget, in part because I’m unsure of what lies ahead and in part because a new year and administration are good times to reflect. According to what I’ve read, the stock market reacted favorably to President Trump’s win, which gives me some optimism for my pension. What will occur next, though?
In addition to reading articles about trade wars and Trump’s desire to purchase Greenland, I’ve been making an effort to stay up to date on MAGA’s ideas about immigration, inflation, and tax cuts. I’m not sure if I should be bothered about such foreign-policy remarks at all, or how much of this to take seriously. I’m more concerned with my financial future than I am with Greenland.
When I get close to retirement, should I stay or go? Should I look for a nation where living expenses are lower? What promises will Trump make that will affect my life and pocketbook over the next four years? Should I be hopeful or apprehensive? It’s difficult for me to choose a side when I see both responses from my friends and online. For the foreseeable future, I’m exclusively on my own side.
Divorced and unmarried
Greetings, Single
I presume that if you don’t care about President Trump’s desire to purchase Greenland, you also don’t care about the Gulf of America.
Regardless matter who is in the White House, we are all living in a state of uncertainty. We would all be placing the same wagers on our future if anyone knew what would happen next, and I doubt that result would be acceptable. Your inquiries include existential (what degree of emotion you feel given the uncertain political landscape that lies ahead), practical (where you reside after retirement), and financial (how you get there).
The good thing is that, as you point out, we already have a rather comprehensive blueprint for the Trump administration. Over the next four years, we’ll see how that plays out. Not every proposal is guaranteed to be implemented. These initiatives address everything from taxes and cryptocurrency to immigration and tariffs. (President Trump has stated that he hopes to establish the United States as the world’s “crypto capital.”)
Is it time for you to leave America? As you get closer to retirement, you’ll have a clearer idea of where and how much you can live on. In addition to the cost of living and housing costs, you will need to take into account a number of other considerations, such as health insurance, lifestyle, climate, and social support (from your community). A woman’s Panama is another man’s Portugal.
For millions of Americans, the Federal Reserve’s upcoming interest rate move is a major concern. There is no guarantee of more rate reduction. According to Fed Governor Michelle Bowman and Kansas City Fed President Jeff Schmid, the combined 100 basis point rate decreases since September have moved the target benchmark rate to “neutral,” meaning it neither supports nor hinders demand.
We all live in a question mark regardless of who’s president.
Market performance is influenced by a number of factors, including the likelihood of U.S. economic growth, company earnings and outlooks, inflation, interest rates, larger geopolitical considerations, and unforeseen setbacks (such as wars, housing crashes, or recessions in the past). However, general elections often have little long-term effect on the success of the stock market.
You’re right. The Dow Jones Industrial Average, S&P 500 SPX +0.85%, and NASDAQ Composite Index (COMP +0.74%) all saw notable increases following the election last November. Additionally, the yield on 10-year U.S. Treasury securities, which are a good option for those who are apprehensive about the future, went up, which meant that borrowing became more expensive.
Trump’s promises of increased deregulation and oil drilling, on the other hand, were mirrored in the share prices of those industries. In a recent letter, U.S. Bank stated that “stocks continued what has been a second consecutive year of strong gains.” “Small business stocks, as well as the energy and financial sectors, performed exceptionally well, seemingly in reaction to the election outcome.”
As you near retirement, you’ll have a better lay of the land.
The Trump government seems to have lowering corporation taxes as one of its top policy priorities. It goes on to say, “The new administration is likely to place a high priority on tax policy.” The Tax Cut & Jobs Act’s (TCJA) majority of its provisions are scheduled to expire at the end of 2025. The package was the most significant domestic policy measure of the first Trump administration when it was passed in 2017.
According to the U.S. Bank, “lower tax collections could ignite new federal budget deficit concerns, also potentially driving bond yields higher” if these policies are maintained and additional tax cuts are implemented. “The Trump campaign has suggested more tariffs on imported goods, but it hasn’t yet provided a clear plan for addressing deficit concerns.”
Like many Americans, you are still trapped in a maze of exorbitant interest rates if you want to sell your house and downsize or even refinance. In order to combat the inflationary storm, the Federal Reserve started hiking interest rates in 2022. Some argue that they were lucky to be able to control inflation at all because they joined the party late.
You may decide to seek more exposure to the stock market.
Concerns about the next four years are not unique to you. Dominik Lett, a research associate, and Romina Boccia, director of budget and entitlement policy at the Cato Institute, a libertarian think tank with headquarters in Washington, D.C., have issued some dire warnings to the incoming administration and urged the 119th Congress to reduce spending and reform entitlements.
They claim that the U.S. national debt, which is fast increasing and at almost 100% of GDP, hinders economic progress and puts Americans at risk of diminished opportunities and the repercussions of a serious fiscal catastrophe. They claim that extending the Tax Cut & Jobs Act without first reducing spending would increase “already unsustainable deficits.”
“The United States faces severe long-term economic consequences from excessive spending and debt, including higher inflation, higher interest rates, and the possibility of severe and sudden austerity when debt financing becomes too expensive,” Boccia and Lett continue, “without significant spending cuts and entitlement reforms.”
What the Fed does next with interest rates is a big question.
You are a single person, earning $150,000 a year gross, so your current income-tax tax bracket for 2025 for people earning $197,300 to $250,525 annually, is 32%. You would have to earn a lot more to exit that bracket. You earn more than double the median salary of a U.S. worker (which currently hovers at $60,000 a year, according to the Bureau of Labor Statistics). So you’re doing something — a lot — right.
Given your age, you should have approximately 54% of your portfolio in bonds and other safe havens and the rest in stocks. But that doesn’t necessarily suit everyone’s retirement plan or their risk tolerance. If you are behind on your retirement and you feel like you need more exposure to the stock market over the next four years and beyond, that’s your call.
Ultimately, what I find most encouraging about your letter is that you cite your own “hubris” that has, perhaps, put you behind where you want to be at this point in your life. That bodes well for the future. It’s important for all of us to take responsibility for our own successes and failures, financial and otherwise, and know that we do have a say in our own destiny.
Blaming others for our financial decisions will only get you so far, whether it’s a financial adviser, employer, or even the President of the United States. Be mindful of the political and economic landscape, but if you are prone to acting impulsively, avoid obsessing about every twist and turn. There will be many surprises, political or otherwise, before you finally retire.
