Planning for Retirement in an Uncertain (Post Election) World

With the presidential election now behind us, many folks are feeling a little anxious and uncertain about the future. Of course, there was plenty of uncertainty leading up the election as well. Both sides of the political aisle were worried about what might happen if the other side wins, and there was even the possibility that the results could be delayed or challenged. Luckily that didn’t happen, and we are entering the end of the year with a clear winner, President-elect Donald Trump. 

What made these worries more problematic is the fact that we can’t control the election outcome (other than voting for our preferred candidate), and this lack of control tends to amplify stress. In fact, a pre-election poll from Betterment asked investors to choose the one word that best conveys their feelings about the election. Not surprisingly, the most common answer was “anxious₁.”

Now that the election is over, though, there are still some uncertainties we need to contend with. For some, it’s waiting to see what happens to the future state of various government programs, social issues or financial reforms. Both sides of the aisle made commitments and promises about changes the American people could expect if they were elected, and now many want to see them make good on their word. Both candidates stated that they would be better for the economy and the financial markets than their opponent. But is that true?

But for those preparing for retirement, it’s natural to wonder how a new administration may impact their plans for the future. Will taxes rise? Will we lose exemptions, programs or benefits that we are counting on to fund our retirement? What will these over-valued markets do next? 

These are all valid questions, so with our time today I’d like to offer some tips for keeping your retirement plan intact and your help you weather the uncertainty with confidence. 

My view on post-election planning can be summed up perfectly in an old proverb, which says, “The more things change, the more they are the same.” This phrase is usually meant to describe situations in which people experience changes, but the same events and experiences happen repeatedly. Sure, change can be scary, but it is important to remember that our basic needs and struggles remain the same – and that we have witnessed many elections and new administrations come and go. While there are always going to be disruptions in the financial markets, political elections have historically not created significant long-term consequences.

There are many other factors that drive market performance besides politics and a new administration. For example, historical data suggests that foreign policy and economic and inflation trends, more so than election outcomes, tend to have a stronger, more consistent relationship with market returns₂.

In general, rising economic growth and falling inflation have been associated with returns that are considered above long-term averages, while falling growth and rising inflation have corresponded to positive but below average market returns. For investors, staying focused on these patterns is probably more insightful than potential election outcomes when it comes to market performance₃.

Further, analysis from JP Morgan & Chase reviewed annual returns for the S&P 500 between 1928 and 2023 and found that non-election years have had slightly higher returns than election years (8% compared to 7.5%). Yet, as the analysis noted, “After polling results are announced and the uncertainty dissipates, stocks have tended to rally. Looking at 40 years of Election Days, stocks have been higher, on average, one year later”. Vanguard analysis found “no statistical difference” in the performance of a non-election year compared to an election year using a scenario with a diversified portfolio more akin to a retirement account — 60% equities and 40% bonds. 

So, what does this mean for retirees and pre-retirees? Here are a few specific steps you can take to fortify your portfolio now. For starters, make sure your emergency savings are well funded. If you’re taking income in retirement from market-based investments, you should have a back-up strategy for taking income someplace else when the markets are down, especially if you still employ a buy and hold accumulation strategy, to avoid depleting your portfolio quickly. And with the Fed starting to cut interest rates, it is also a good time to check the yields on your short-term savings and confirm you are receiving market-level rates.

Ultimately, we need to remember that election seasons cause noise and uncertainty, but staying committed to your long-term goals is crucial. A solid retirement system with a downside risk mitigation program is specifically designed to anticipate and help you manage financial uncertainty. It includes built in flexibility that helps your portfolio adapt to market disruptions. Both elections and the markets come with built-in uncertainty, and that’s OK. Keep your eye on the big picture and if you do not have a retirement system instilled with downside risk mitigation, why not?  Going into 2025, isn’t it time to put you and your family in the highest probability of retirement success? 

And as always - be vigilant and stay alert, because you deserve more!

Jeff Cutter, CPA/PFS is President of Cutter Financial Group, LLC, an SEC Registered Investment Advisor with offices in Falmouth, Duxbury, and Mansfield, MA. 

Insurance offered through its affiliate, CutterInsure, Inc. We do not offer tax or legal advice. Jeff can be reached at jeff@cutterfinancialgroup.com. This information is intended to provide general information. It is not intended to offer or deliver investment advice in any way. Information regarding investment services is provided solely to gain a better understanding of the subject of the article. Different types of investments involve varying degrees of risk, including the potential for loss. Therefore, it should not be assumed that future performance of any specific investment or investment strategy will be profitable. Insurance product guarantees are backed by the financial strength and claims-paying ability of the issuing company. Market data and other cited or linked-to content is based on generally available information and is believed to be reliable. Cutter Financial does not guarantee the performance of any investment or the accuracy of the information contained in this article. Cutter Financial will provide all prospective clients with a copy of Cutter Financial’s Form ADV 2A, Appendix 1, applicable Form ADV 2Bs and Form CRS as well as the firm privacy policy. Please contact us to request a free copy via .pdf or hardcopy. 1. https://tinyurl.com/nhh3pcp7 2. https://tinyurl.com/44e5ss4h 3. Ibid 4. Ibid