Retirement and the Impact of Potential Policy Changes #

Retirement accounts may be a significant part of your net worth, or perhaps large balances remain just a goal. As changes loom over the next four years, many people are concerned about how these might help or hinder their financial future.

Following the recent presidential election, questions about retirement topped the list of about 1,200 money-related inquiries. Most queries did not revolve around Social Security; rather, they focused on potential policy shifts under a new administration.

For changes to occur, the President-elect must prioritize and initiate actions, which lawmakers then need to endorse and legislate. Despite this, it’s possible that little of substance will be altered significantly in the next four years.

During the presidential campaign, there was minimal mention of changes to IRAs or workplace retirement accounts like 401(k)s. One notable exception involved discussions about environmental, social, and governance (E.S.G.) funds within retirement plans. An existing Labor Department rule requires pecuniary factors to be primary for employers acting as fiduciaries in selecting funds. However, ample evidence exists that E.S.G. funds perform well, prompting reconsideration by employers.

The Biden administration previously reversed a rule limiting E.S.G. funds in 401(k) plans, but there are intentions to revert this change through executive actions. Additionally, recent federal legislation adjusted the rules for withdrawals, raising the minimum age to begin from such accounts to 73.

There’s a possibility of extending tax cuts from the first term, but costs must be balanced, potentially through changes like ‘Rothification.’ This involves modifying pretax savings benefits, such as capping 401(k) savings that remain tax-free, transitioning other savings to Roth 401(k)s.

While the likelihood of these changes remains uncertain, past remarks during debates on tax legislation affirmed no changes to 401(k)s. Those living abroad face restrictions on investment actions and must navigate these carefully.

The Social Security Administration’s ‘Payments Abroad Screening’ tool can verify eligibility for benefit payments in different countries. New benefit applicants must choose direct deposit, requiring an understanding of international banking logistics. For specific inquiries, the Social Security Administration offers assistance both online and through their offices.