What Trump May Mean for Your Retirement

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If Donald Trump’s election signals anything, it is that things are about to be shaken up in a big way. It is always dangerous, perhaps even foolish, to try to guess what Trump will do, especially given the differences that emerged between the President-elect and Republican Party orthodoxy during the primaries and presidential campaign.

Two potential conflicts between Trump and Congressional Republicans involve Social Security and Medicare/Medicaid. As the baby boom generation retires and the burden of paying retirement and healthcare benefits falls on younger voters, will the two major U.S. social welfare programs even be recognizable in a few years?

During his campaign for the presidency Trump promised to leave Social Security alone. Forbes reported:

American voters were pleased to hear you say that, “We’re going to save your Social Security without killing it like so many people want to do” and that you “will do everything within my power not to touch Social Security, to leave it the way it is.”

But will Congressional Republicans let Trump keep that promise? After all, the Republican Party has been trying to eliminate Social Security since it was first introduced in 1935. President George W. Bush made Social Security reform/privatization his main domestic policy issue at the beginning of his second term and failed to make any headway. However, he did not have a compliant Senate as does Trump.

What could happen? One aspect of the Bush plan was to gradually eliminate Social Security by allowing younger workers to choose to contribute to Social Security or to a private retirement account. House Speaker Paul Ryan supported that proposal and an even more radical approach to privatizing Social Security. Bush is no longer in office, but Ryan is and pressure on Trump to make big changes to Social Security will be strong.

Candidate Trump also promised to protect Medicare benefits but his single specific statement was limited to allowing Medicare to negotiate with pharmaceutical companies over drug prices, a position Republicans have always opposed.

In fact, Paul Ryan last week also said a move to privatize Medicare is once again on the Congressional agenda. In an interview Ryan said, “Medicare has some serious issues because of Obamacare. So those things are part of our plan to replace Obamacare.”

These may be the two big issues for retirees, but there are others. The U.S. Department of Labor has begun implementing a rule requiring any financial advisor who handles retirement accounts to put their client’s interests ahead of the advisor’s own. This is usually called the “fiduciary rule” and Republicans have opposed it. Trump has promised less regulation and it is hard to see how this rule will survive until its full implementation is due in 2018.

Five states have recently enacted legislation to force every worker into a retirement plan. Usually called “automatic IRAs” the laws require employers either to enroll their employees in a 401(k) plan or a pension plan or to direct employees to a portable IRA administered by the state. This had some bipartisan support, but there are parts of the financial industry that are strongly opposed to automatic IRAs. Chances of getting a federally backed automatic IRA appear to be slim and none.