It’s been quite an eventful week since the U.S. election of Donald Trump. I’m not going to get into my preference of candidate because no one cares and I don’t want to take away from the purpose of this site or post. What I did want to do is take another look at the concerns I had pre-election and the realities since then. For simplicity I’ll include my original thoughts and tack on from there.
Health Care – thoughts pre-election – One thing I think both parties agree on is that the Affordable Care Act (ACA) has issues. It has not slowed the rise in health care costs as hoped. What it has done though is provide some level of certainty to Early Retirement in a key way. As someone with a healthy income and savings for retirement, my major worry is a serious medical condition. The ACA removed the concept non-coverage of pre-existing conditions or rejection for coverage due to a condition. The way I’ve always thought about it, I don’t need insurance for when I ding my bumper in my garage, I need coverage from when I take out a Porsche. In other words I can afford the small stuff out of pocket. I need my health insurance plan to cover a disaster. There will certainly be attempted changes from either party. We’ll be interested to see how any changes to health care are implemented over the coming years.
Trump on Health Care since Election – The soon to be president suggested that he might work to reform the ACA while keeping the provision forbidding insurance companies from denying coverage of pre-existing conditions. While this certainly doesn’t fully address my healthcare concerns it leaves the door open for a Trump policy that is more friendly to early retirement than a full repeal. Additionally, one of Donald Trump’s suggested replacements to the ACA includes the expansion of healthcare savings accounts. For those with FIRE ambitions this could provide a valuable way to sock away additional pretax dollars. Any change will not take effect until at least 2018 if I were a betting man, so we have plenty of time to adjust our course as need be.
Taxes – thoughts pre-election – I separate taxes into 2 buckets, pre-retirement and early retirement. Obviously the less I can pay the better for both categories. That said, I would take stability for the early retirement portion over paying less taxes in my working life now. Both parties have some serious suggestions for how to change the tax code. Neither of these appear to have a serious impact. Based on history I would guess that any changes will be incremental, but small changes can make substantial differences in the best ways to structure early retirement draws.
Trump on Taxes – Donald Trump’s greatagain.gov includes a section titled Tax Reform/Economic Vision. This section, while lacking detail, concludes by stating that “A Trump Administration tax plan can be summarized as lower, simpler, fairer, and pro-growth.” I have a hard time seeing from that quote and other statements that Trump has made during his campaign how his tax plans will do anything to hurt our early retirement plans from a tax aspect. Typically those in the buildup to early retirement phase make reasonable incomes and save a large portion of their incomes. Any concern here has to do with the flip side of the coin. If our taxes are lower, where does the money come from. We have already seen interest rates rise as a reaction to promised tax cuts and infrastructure spending and the inflation that could create.
The Stock Market/Economy – thoughts pre-election – With large amounts currently invested in the stock market and the need for those saving to continue to compound, the direction of the market will have a huge impact on early retirement. Not only will the market results directly impact when we can retire but also after we do retire how stressful that early retirement feels. The market has been on a wild ride lately primarily due to uncertainty. Regardless of the outcome of the election I hope that the certainty factor calms the markets somewhat. Then again, a temporary dip in the market could be a nice buying opportunity.
The Stock Market/Economy – post-election – While some “financial experts” predicted a drop of 10% or more should Trump win the presidency…. and watching the market futures the night of the election this appeared a possibility… that is not what came to pass. The markets quickly looked at the Trump pledges and how those were likely to impact stocks. Healthcare stocks have been up with the promise of an ACA repeal. Bank stocks have been on a tear due to the suggested pull back of regulations such as Dodd-Frank and also due to the implied earnings improvement from increased interest rates. Conversely, foreign markets and tech stocks have been dropping due to anticipated isolationist policies. Net, we appear to be up since the election but it is not as simple as watching the Dow 30 for us as we are diversified across sectors and across the world.
Moral of the Story – Its early. That’s really all there is to say. It is completely unclear to me at this point how Trump’s policies will evolve as the detail is determined. It is further unclear how the Republican congress (and Democratic filibuster) will impact the president’s attempts to modify the plethora of complex laws associated with these topics. More to come.
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