I’m 61 years old and plan on retiring within the next 5 years — but the US election results have me spooked
With the U.S. election behind us, focus now shifts to what a second Trump administration might mean for key issues like immigration, the economy, and defense. But if you’re in your early 60s and nearing retirement, you’re probably keeping an eye on what the Trump transition means for your financial future.
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Market volatility often spikes around elections, but they don’t usually have a long-term impact. "For investors, policy does matter, especially when it relates to tax and trade, but as we have stressed, earnings, inflation, interest rates, and other macro forces are really the key drivers of longer-term performance," said LPL Research.
“The analysis points to minimal impact on financial market performance in the medium to long term based on potential election outcomes,” said U.S. Bank. “The data also shows that market returns are typically more dependent on economic and inflation trends rather than election results.”
Elections can, however, impact retirement plans if government policies in areas like taxes, Social Security and healthcare are changed. In a pre-election survey by Wealth Enhancement, 80% of Americans said they expected the 2024 election to influence their retirement plans. Trump has vowed to protect Social Security but he has proposed eliminating taxes on benefits, ending taxes on tips and overtime, imposing tariffs, and expanding deportations, which would hasten the depletion of the program’s trust funds by three years, from FY 2034 to FY 2031, according to the Committee for a Responsible Federal Budget.
Resilience as a strategy
Let’s say you’re 61 and planning to retire within five years. Here’s how you can safeguard your retirement plans and stay on track. With retirement only a few years away, your focus should be on stability, capital preservation, and controlled growth. You’ll need to find the right asset allocation for this and rebalance your portfolio periodically.
Let’s look at some investment options suited to a short-term retirement horizon:
Simplified diversification
Target-date funds are specifically designed for people nearing retirement. They offer a diversified mix of stocks, bonds, and other assets, automatically adjusting to a more conservative allocation as you get closer to retirement. This option can simplify your investment strategy while helping manage risk.