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Inauguration Day is just a few weeks away, and many are bracing for the economic policies of President-elect Donald Trump. Many anticipate these measures may bring significant changes, while others fear they might burn a hole in the pockets of the middle class. Experts urge the middle class to take proactive steps for potential economic shifts. It is better to be ready than suffer. Here are 5 financial moves you should make before the Inauguration Day.
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Reassess Investment Strategies
Every political transition can lead to significant economic uncertainty. Experts urge that the middle class review their retirement strategies before the inauguration. Putting more money into a 401(k) retirement account can be a good option. This can help you save on taxes now and grow your savings tax-deferred until retirement. Or, you can contribute the maximum allowed to Individual Retirement Accounts (IRAs) to ensure full advantage of tax benefits. Traditional IRAs offer tax-deferred growth, while Roth IRAs provide tax-free withdrawals in retirement, which can be beneficial depending on your future tax situation. Adjust your investment portfolio to focus on stable, long-term options like index funds or dividend stocks. These strategies can protect your investments from market volatility or unfavorable tax policy changes.
Review Your Taxes
President-elect Trump made a promise to extend or make permanent the individual and corporate tax breaks. He encant this in his first term, expected to expire in December 2025. To fulfill his commitment, Trump needs congressional approval by the end of the year. Now, experts are suggesting middle-class families prepare for potential tax law changes. You can take tax advantage of tax-deferred accounts like 401(k)s or IRAs. Or, to reduce taxable income, make tax-efficient investments like charitable giving, municipal bonds, and managing capital gains. Everyone's tax situation is different, so always get professional help.
Pay Down Mortgages
Trump's fiscal policies can cause unpredictable rises in mortgage rates at the end of the year and into 2025. Though Trump campaigns to reduce interest rates, his commitment to decrease tax rates, impose tariffs, and reduce business regulations could worsen inflation and increase the national debt. If the interest rates rise, floating-rate loans (also known as variable-rate loans) also increase. In this situation, experts recommend paying down debts or converting them to fixed rates.
Brace for Market Volatility
Though investors are anticipating economic policies will increase the country's economy, Trump's tariff plan, tax changes, and immigration policies could raise interest rates, creating market volatility. Financial experts advise middle-class families to consider investing in certificates of deposit (CDs). With interest rates fixed, you will not be affected by changes in the stock market or market volatility. CDs can offer a guaranteed return without the risk of market losses. Currently, CDs are providing decent interest rates, offering a predictable return on your investment. But, if the economy improves and the interest rate decreases, investment in CDs may not be a good idea.
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Reevaluate Your Health Insurance
Vice President-elect J.D. Vance said in his campaign that the new administration could let insurance companies categorize enrollees into different risk pools and offer plans based on potential health risks. This could cause the middle class to reevaluate health insurance. Experts suggest families review and revise their health insurance plans, particularly focusing on Health Savings Accounts (HSAs). These accounts provide tax advantages and offer opportunities for long-term savings to cover future medical expenses. To prepare for unexpected medical costs and get affordable coverage, set up a health care emergency fund, consider long-term care insurance, and keep tabs on potential changes in premiums.