Unless you’ve been living in a cave, you know there’s a big election coming this November.
(And even if you’ve been living in a cave, I’m sure the direct mail companies have found a way to reach you with political mailers…)
But did you know the election could greatly impact your clients… and their retirement approach?
I spent my early career working in the White House and on Capitol Hill. And one thing I learned was that elections can impact U.S. savers in two ways:
Short-term impacts based on new laws and regulations (what policies will a given administration pursue? What laws will Congress pass?)
Long-term impacts based on the future effect of the laws and regulations passed today (will taxes be higher in the future to offset today’s spending? What will today’s regulation do to future economic conditions?)
The 2024 election could have both short-term and long-term impacts on U.S. savers. And those savers are going to need the help of financial advisors to weather the storm.
What’s at Stake in November
November’s Presidential Election looks like it will be a rematch between current U.S. President Joe Biden, and former U.S. President Donald Trump. Equally important is the makeup of Congress: who will control the House and Senate, and how tight will their margins be?
Here are the top two items I’m watching in the 2024 election when it comes to retirement savings in the U.S.:
Trump Tax Cuts: In 2017, Congress passed and the President signed into law comprehensive tax reform called the Tax Cuts and Jobs Act. This law lowered individual income tax rates for millions of Americans (myself included and probably you, too).
But those tax cuts were not permanent. In fact, they expire next year in 2025. That means unless Congress and the President act to extend those cuts or pass new cuts, all of our tax brackets will revert back to their older, higher rates in 2026.
This matters to any saver who has funds in a tax-deferred retirement vehicle, like a 401(k) or IRA. Since taxes on retirement savings are often deferred to the future, higher tax bracket rates in the future could mean higher taxes for your clients… leaving them sending more money to the IRS and having less to spend as retirement income.
President Biden has indicated he wants to let the tax cuts expire for wealthier Americans while extending them for lower-income Americans. He plans to pay for the extension with new taxes on wealthier Americans. President Trump has indicated he wants to extend the tax cuts for all Americans. And then there’s the question of Congress: Will the House and Senate pass an extension?
All of it adds up to a big question mark on future tax rates for your clients.
Government Spending: The federal debt has exceeded $34 trillion. Congressional spending continues to grow. And our population is aging, meaning more Americans are relying on government programs like Medicare and Social Security.
All of it adds up to a big math problem for our federal government. And a big question around how each administration might address this problem.
I detailed the government spending problem (and how it could impact your clients) in this blog post from earlier this year. Regardless of the 2024 election outcome, it’s hard to see a path forward that doesn’t include higher taxes for your clients – and that’s a risk many savers want to protect themselves against going forward.
Want a Deeper Dive? Watch this Video & Read this Analysis
Here at Stonewood Financial, I host a State of the Union call each quarter focused on the latest news from Washington and how it could impact your clients.
Last week’s call was all about the 2024 election and the impacts listed above. If you’re interested in diving a little deeper into how to protect your clients from the election outcome, I invite you to watch the recording:
I also authored an analysis of the election and its potential to impact savers with retirement funds in 401(k)s and IRAs. You can read that analysis here:
Any way you look at it, the 2024 election will increase the political divide and instability in our nation. And that makes it harder to predict legislative and regulatory outcomes for your clients.
Your clients need protection against changes coming from Washington. And advisors who understand tax and asset diversification are best poised to help. Need support? Stonewood Financial’s software and marketing toolshave you covered.
Free Study Group Replay
How Stonewood Advisors Stay Ahead of the Next Planning Conversation.
Watch a recent Stonewood Study Group focused on the legacy planning conversation. You’ll see how Stonewood helps advisors break down timely planning topics, client conversation angles, and practical strategies you can put to use immediately.
Expert insights. Real strategies.
Study Group Replay
Timely planning topics
Real client conversation angles
Practical strategies you can use
Real Advisors. Real Results.
See how advisors are using Stonewood software to win larger cases and deliver better
outcomes for their clients.
An advisor was working with a prospect who was a real "do-it-yourselfer" when it came to Roth conversions.
The client was converting assets up their existing tax bracket – and hadn't considered any impact to
IRMAA.
With Roth Done Right, the advisor was able to show an alternate pattern that sped up the conversion to
6 years. The new structure offered $30,000 savings in conversion taxes – a 20% reduction on the
prospect's conversion tax bill. The report also showed hundreds of thousands of dollars in long-term
tax and IRMAA savings from the converted assets – an amount the prospect hadn't been able to quantify
on his own.
Outcome
A new client with $1M in new AUM, and a $1M FIA sale to fund the conversion process.
An advisor was working with a prospect who already had assets with Ken Fisher. Fisher's team presented a
5% systematic withdrawal projection, so the advisor needed a stronger way to frame the income
conversation.
Using the Annuity Alpha report, the advisor showed how an annuity could deliver over 8% in annual cash
flow with lifetime income, plus a long-term care doubler. The contrast was clear enough that the prospect
moved forward.
Outcome
$1.5M placed and a $100K in new business revenue.
An advisor was working with a 58-year-old couple with an established, well-funded retirement income plan,
leaving an additional $3M IRA to build out a legacy for the kids. The couple's existing advisor had no
real additional plan for this money, other than to keep it in their managed account and grow that money as
much as possible for the kids.
Using the Legacy Done Right report, the advisor showed the need for tax planning on this $3M IRA.
According to the advisor, the simple analysis "opened up the wallet" to the Roth conversion story. The
advisor then used the blended Roth/Life feature in the report to show a blend of Roth Conversion assets
with some Life Insurance to help maximize the client’s legacy.
Outcome
$3M in motion. The advisor picked up a $1.5M FIA sale that will be converted to Roth. And the advisor
also sold a 5-Pay Protection focused IUL policy at $225,000 of premium per year.
An advisor group incorporated the Total Tax Burden report into the strategy presentation for all new
prospects. They ran the tax snapshot for every new client as part of their first meeting conversation,
quantifying the growing tax burden of IRA money – and illustrating the kinds of tax savings possible
when working with their firm.
Starting in January of 2023, this simple analysis was presented to every single prospect who walked in
the door. The goal was to differentiate their practice and drive overall revenue growth through various
Roth conversion strategies.
Outcome
From 2022 to 2025, new annual AUM rose from $5M to $50M. Annual FIA sales rose from $3M to $35M.
And annual life premium rose from $50K to $1M.
