Greetings, Quentin
When Trump gets office, I’m really concerned about a recession.
My retirement savings are causing me anxiety. My late husband’s medical problems required us to spend almost all of our funds. It is a fact that I am far, much luckier than most others, even yet I am not “rich.”
The value of my paid-off house is approximately $425,000. In addition, I have a one-bedroom condo that is worth roughly $240,000 and has finally been paid off. It’s rented out. My monthly take-home pay is $1,000 after expenses like insurance, HOA dues, and property taxes.
After my husband passed away, I inherited roughly $100,000 from my parents, which I currently invest in low-risk securities. In addition to my rental income, I work as a consultant for a non-profit organization and make about $50,000 a year.
“I am terrified of what may come in the next four years.”
Even if I go part-time after a few years, I intend to continue working for as long as I can. I lead a rather straightforward existence. An occasional airplane journey is my biggest indulgence because I like to travel to see family or friends a few times a year. I visit the beach and go hiking.
I’m thinking of selling my rental property. I want a safe retirement at age 62. I’m terrified of what the upcoming four years may hold. Is it better to sell my rental and make another investment? Should I make a different investment with my $100,000?
Should I sell my house, move into the rental, downsize, and invest the proceeds? Or wait till I’m ready to become semi-retired and perhaps qualify for full Social Security—assuming there will be any after Trump takes office—then get a reverse mortgage?
Dear Sleepless,
Don’t allow your emotions and political views to dictate your finances. You write that you are “worried” about a recession after Trump takes office. You say that you are “afraid” of what the next four years will bring. Take a deep breath and go for a long hike. Fear is not a reason to make a financial decision, least of all two of the biggest moves you could make – selling an income-generating property and making an impulsive decision to re-invest your $100,000 inheritance. If you have a low risk tolerance, I would say the money is where it belongs.
Trump will inherit, by most measures, a strong economy from President Biden. Inflation has finally cooled after economists worried that the economy was overheating, with the consumer-price index currently running below 3%. Unemployment hovered at 4.1% in December. Gross domestic product growth in the second quarter outperformed many economists’ more pessimistic expectations due to persistently high interest rates and worries about the cost of living on everything from eggs to real estate.
The Federal Reserve Bank of St. Louis issues a regular report looking at the prospect of a recession in the U.S. Their indicator is based on real-time data, “that is, the unemployment rate (and the recent history of unemployment rates) that were available in a given month.” As you can see from this graph, the likelihood of a recession in 2025 is slim. Other projections measure the probability of a recession in percentage terms; they vary significantly, showing – to me, at least – that no one really knows.
Let’s assume you are neither a Democrat nor a Republican, and come to the table (almost) free of bias. It’s a mixed bag whether you are a CEO, retiree or white/blue-collar worker. As to your question (or fears) about a recession, no one knows. Bad things happen all the time, as we recently saw with the fires that swept through parts of Los Angeles. Trump, whether you voted for him or not, will introduce a rake of pro-business policies (deregulation, tax cuts and an increase in oil and gas exploration among them). They won’t all happen overnight. They will take time.
Take a deep breath and go for a long hike. Fear is not a reason to make a financial decision.
We all live with a degree of uncertainty, and our ability to deal with that uncertainty tests our evolution as human beings. “Markets have been re-pricing the prospect of Federal Reserve rate cuts this year in the wake of more hawkish Fed commentary,” according to ING, a global bank and financial-services company. Recent data suggests “the economy is maintaining its strong momentum and that inflation continues to be sticky with concern over tariff implementation starting to impact corporate thinking and behaviour,” it added, and a “clean election outcome” will help kickstart delayed investment decisions and hiring.
Social Security is another unknown. Trump has said not one “single penny” will be cut from Social Security during his tenure, but it’s hard to know whether he will stick to that plan. Others say even that seemingly cut-and-dry statement is open to interpretation. The program has continued supporting retirees since 1935 and there is certainly the will among the American people for that to continue. That said, it’s expected to run into insolvency issues by 2035, just in time for its centenary, according to the Social Security and Medicare Board of Trustees. This seems to be an issue independent of who is in power.
With a new administration, everything changes and yet stays the same. The stock market, based on historical data, will likely continue to rise. The housing market, notwithstanding a massive recession, will also remain robust. The share of houses seriously underwater – where the price is worth less than the mortgage – was less than 3% last year, compared to 26% during the subprime mortgage crisis in 2008, according to HousingWire. That’s not to say that the 30-year mortgage rate, now 6.9%, is not weighing on the housing market.
Trump’s victory brings some clarity with a Republican trifecta – his party will control both the Senate and the House of Representatives. He will have an easier time passing his agenda, which will likely include looser regulation for the financial and corporate sectors, a clamp-down on immigration and some visa programs, corporate tax cuts and tougher trade tariffs. While economists expect this to increase economic growth, it will come at a price, namely raising the cost of imports. Economists say this will have an adverse effect on the labor supply.
Some market participants say real-estate investment trusts are more attractive than bonds due to higher relative yields, noting their diversification and liquidity, meaning you can access your cash more easily than many other investments. (Read more about four REIT stocks that pass a strict quality screen here.) Looking at global stock markets between 1971 and 2024, Vanguard said the impact of U.S. presidential elections on stock markets has historically been “minimal.” Other geopolitical events, interest rates and, yes, natural disasters have an impact too.
It’s a mixed bag whether you are a CEO, retiree or white/blue-collar worker.
To address your macro concerns about what happens next, the biggest economic risk from a second Trump presidency is a loss of confidence in U.S. governance, according to Chatham House, a U.K.-based think tank. “Trump may not actually expect to impose across-the-board tariffs, but rather intends to use them as leverage to negotiate benefits for the U.S.,” Creon Butler, Chatham’s director, global economy and finance program, wrote in a recent report.
Cutting government spending may also prove a challenge. “Over 80% of federal government expenditure comprises payments for Social Security, Medicare, defense, debt interest and transfers to states,” he adds. “These areas are either mandatory or largely untouchable politically, leaving just $1.1 trillion to absorb cuts. Much of this spending is vital to the operation of the U.S. economy or has strong political support. So the scope for Trump to make significant savings in federal spending appears limited.”
The “net result” of Trump’s policies – from immigration and tariffs to tax cuts and spending, assuming many of them were enacted – “could be increased inflationary pressures, a slower pace of Fed interest-rate reductions, and some cooling in growth, bringing it back to the U.S. trend rate of 2%-2.5% in 2025,” Butler adds. “But the long-term economic implications of Trump’s domestic and international governance agenda could be a lot more serious.”
You don’t reveal the return on your $100,000 investment. You can still get CD rates of up to 4.6% in January. With CDs, you are committing to a set period of time. The rate can change with high-yield savings accounts, based on the Fed’s benchmark rate. When you buy a CD, the rate does not change. High-quality fixed income and Treasuries typically perform as interest rates start to decline from a recent peak. Buy an annuity if you are looking for a guaranteed income, but pay close attention to their fees. Consult an adviser about a reverse mortgage.
Act in accordance with your own personal risk tolerance, but don’t act hastily. Try to enjoy your journey into retirement.
