Election Results and Your Next Steps
Leading up to the election, we focused on several areas in your life that the results could have major impact on. Right now – post election – is the time to prioritize your to do list in light of the results.
As I sit here writing, the presidency is still uncertain. Yet the House and Senate have pretty clear paths. There will be a gridlock in Washington. The question is, will it be more than what we have seen the last two years or about the same? This answer lies with the presidency, but what you need to know remains the same.
Gridlock will have an impact on your healthcare, investments, income taxes, banking, and estate planning. This is not to mention the overall impact on the economy, which we will save for another time. Today it’s about you. What do you need to consider as priorities during this time of balanced power in Washington?
#5…Save as much as you can. The one constant in D.C. is that nothing stays the same. Due to Tax Reform, you have been given the gift of more cash flow to your bottom line. What are you doing with it? If you are making it part of your everyday budget, you may want to reconsider. Tax Reform ends in 2026 – if we stay in gridlock. We have never met anyone who thinks they saved “too much” money. Tighten your belt now and your future self will thank you.
#4…Use low interest rates. A 30-year mortgage quote issued this week was for 2.65% – which is unbelievable! Perhaps you need to refinance or will need home improvements within the next five years. Maybe you need to find extra cash flow to be saving. This is the time to be asking what is best for your unique situation.
#3…Get your investment risk right. The markets apparently like the path to Gridlock. They are also addicted to money being pumped into the economy. We forget sometimes what the markets actually consist of though. It is made up of a lot of Mom and Pop originated businesses that are typically worth a finite amount. If things are over-heated in the markets, there will be a pullback. The worst thing that could happen is you, and others like you, making an emotional decision during that pullback. Get your risk right now so you can sleep at night for “when” – not “if” – it happens.
#2…Take Uncle Sam out of your estate plan. If you don’t mind the prospect of Uncle Sam slapping your family with a 40% plus tax on your estate, don’t worry about an estate plan. If not, this needs to be a hot priority for anyone with an estate at least over… well, it could be as low 3.5 million as opposed to the current threshold of 11 million. Gridlock will most likely give you two more years to alter this, but Senators do sometimes retire or even die. Moreover, this planning can sometimes take twelve months or more to get done, so there is a sense of urgency. You have been given a second chance. Don’t waste it.
#1…Diversify your taxes. Really, how many politicians does it take to change a light bulb? The answer is two. There is one to change it and the another to change it back again. This is the normal course of things in Washington… except we are living in abnormal times. Our country has an almost insurmountable deficit, our work-force population is currently predicted to keep declining, and we have the lowest tax rates in the modern history of our country. Which translates to taxes eventually going up. The only difference the Washington power base makes is the answer: “How much?” It is now or never to diversify those tax bombs looming in your future. Maybe you have highly appreciated stock or real estate. Maybe you have a large 401(k) or IRA. Maybe you will simply have a lot of pension income in retirement. You need to develop a tax diversification plan and you have very little time to get one.
Time waits for no one. And, as Benjamin Franklin quoted, Time is money. The next two years may be the most fiscally valuable two years of your entire life. You can either spend it or invest it… the choice is yours.