How a Biden Win in 2024 Could Impact Your Retirement Savings
Presidential candidates from both parties love to paint a picture of the economic catastrophe that would occur if their opponent got elected.
Once in office, presidents from both parties love to spend mammoth amounts of money. Setting aside the pandemic spending spike in 2020 and 2021, every president in this century has broken spending records. They let someone else figure out how to pay for it in the future.
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But that doesn’t mean each president doesn’t have their own vision for tweaking the rules around taxes or retirement — rules that directly affect you as a taxpayer and retirement saver.
So what might you expect if President Biden wins reelection in November?
Trump-Era Tax Changes Likely To Expire
The Tax Cuts and Jobs Act of 2017 made several changes to tax rules. Some are popular; others are obscure or unpopular. But all of them are scheduled to sunset at the end of next year.
It’s hard to imagine the Biden administration going out of its way to prevent them from doing so.
As a quick recap, the act nearly doubled the standard deduction, simplifying tax returns for millions of taxpayers by helping them avoid itemizing deductions. It also doubled the lifetime exemption for gift and inheritance taxes.
Less popularly, it reduced the cap on deductible mortgage interest, from $1 million to $750,000, and it capped the deduction for state and local taxes at $10,000.
The law also shifted the seven tax brackets and reset the top tax rate from 39.6% to 37%.
Good or bad, popular or unpopular, whether or not these tax changes will renew likely depends on who wins the Oval Office come November.
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Changes To Avoid Social Security Insolvency
The Congressional Budget Office projects the Social Security Administration (SSA) to exhaust its trust fund in 2032 and become insolvent in 2033.
It’s highly unlikely a politician will let Social Security disappear. But how exactly to pay for continued benefits remains a question for debate.
Already, the SSA has quietly been raising the income ceiling for paying into the system faster than it’s been raising benefits. This year, the IRS will collect these “FICA taxes” on earnings up to $168,600, up more than 5% from a ceiling of $160,200 last year. Expect that ceiling to keep rising faster than inflation no matter who wins the presidency, but a Biden win would likely see it rise faster.
In fact, the very notion of a cap on FICA taxes has the look of low-hanging fruit. Don’t be surprised if a second-term President Biden tries to remove it as a way of adding revenue for the SSA.
On the spending side, either president could raise the age brackets for benefits. After all, life expectancy in 1937 was 58.0 for men and 62.4 for women. Today, life expectancy is more than 15 years longer, at 73.5 for men and 79.3 years for women. However, the benefit ages have barely budged.
Given the power of the senior lobby, that change may be less likely.
Targeting Retirement Savers for Taxes?
In fiscal year 2022, the U.S. government collected $4.9 trillion in revenue. And it spent $6.3 trillion.
Don’t expect Uncle Sam to rein in spending anytime soon. That means the spending will be paid for through a combination of borrowing more money and potentially raising taxes.
President Biden and his allies have raised the idea of targeting retirement accounts for tax revenue several times. The original Build Back Better bill included changes to required minimum distributions for some retirement accounts. In his fiscal year 2024 budget proposal, Biden took aim at retirement accounts for middle-to-higher earners.
A second Biden presidency could therefore impact many Americans’ IRAs, 401(k)s and other retirement accounts.
But that remains speculation. How exactly America pays the piper remains to be seen, but when the tab comes due, expect it to hurt — and don’t assume your retirement accounts or benefits are off the table.
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This article originally appeared on GOBankingRates.com: How a Biden Win in 2024 Could Impact Your Retirement Savings
