I'm retiring in 7 years. Do I need to Trump-proof my assets?

San Francisco Chronicle​

11 hours ago

Reader Christian in Oakland asks:
I'm in my 50s and planning to retire in seven years. Does Trump represent a systemic risk to the economy that should be reflected in my retirement plan's asset allocation, i.e., reducing my exposure to U.S. stocks broadly now?
Presidents come and presidents go, and the markets rise and fall. A durable retirement portfolio should be able to weather it all. And everyone who's approaching retirement should be making plans to de-risk their asset allocation.
First, let's talk about that de-risking process. Like everything about investing and retirement, there's no one-size-fits-all approach.
The fundamentals of risk reduction
Broadly speaking, you want some portion of your investments in bonds and other low-risk vehicles. JL Collins, the author of 'The Simple Path to Wealth,' said he recommends starting to move some percentage of your investments to bonds about five years before you plan to retire, scaling up depending on your tolerance for risk, but never having less than 50% of your total investments in stocks.
Christine Benz, the director of personal finance and retirement planning for Morningstar and the author of the book 'How to Retire: 20 Lessons for a Happy, Successful and Wealthy Retirement,' said she advises people to start thinking about de-risking their portfolio around age 50. Statistically speaking, most people think they'll work longer than they actually end up working, she said, so it makes sense to start hedging your planned retirement age well ahead of your desired timeline.
However, that's not to say you should dump half your stocks once you hit the half-century mark. It should be a slow, measured transition toward what you want your finances to look like when you clock out for the last time.
For what that financial picture should look like, she's written about what's known as the bucket approach: Bucket 1 is enough liquid funds to cover a year's worth of expenses (two if you're risk-averse), minus guaranteed funds coming in from sources such as Social Security, pensions or annuities; Bucket 2 has primarily low-risk investments to cover five to eight years of expenses; and the rest goes into Bucket 3, which consists of high-risk, high-reward investments like stocks.
Brian Pollak is a partner and portfolio manager at Evercore Wealth Management, which handles primarily clients with net worth of more than $10 million. He said even for very wealthy people, it makes sense to diversify into short- and long-term bonds.
As for international stocks, it's certainly not a bad idea to own some, no matter how far you are from retirement. Both Benz and Pollak recommend people maintain a blend of stock investments that roughly mirrors the global market capitalization of the national and international markets. The U.S. represents around two-thirds of it, so have two-thirds of your stocks in the U.S. market. Collins advocates for a simpler investment strategy that focuses on the U.S. market, though he's written that he's not inherently opposed to owning foreign stock.
So: With retirement on the horizon, should you diversify? Yes. Should you diversify into international stocks? It could fit nicely into your overall investment strategy. The S&P 500 typically outperforms global equities, though certainly not always, and international stocks have done better so far in 2025.
What about the Trump factor?
But does Trump present such an existential risk to the long-term health of the U.S. economy that it should make you move away from U.S. stocks?
It's true that Trump 2.0 has included a lot of policy decisions that most market watchers aren't thrilled about. Crackdowns on immigration strangle the labor supply in industries including construction and agriculture, both of which are incredibly important in California. The tariff turbulence from 'Liberation Day' in April sent the market into bear territory, though it seems to be shrugging off the latest round of levies that kicked in last week.
Those are policy decisions that have historically increased inflation, something Trump campaigned on fighting.
But the thing about policy decisions is that bad outcomes can be reversed, either by this president or whoever comes into office next.
What's more concerning, experts say, is Trump's recent decision to fire Bureau of Labor Statistics Commissioner Erika McEntarfer. Trump, who has a documented history of making false or misleading statements about people he views as political opponents, claimed without evidence that the agency's recent negative jobs report was 'rigged' against him.
Historically, there has been a division between members of a presidential administration and the bureaucrats who put together reports like that, said Jim Wilcox, a professor of the graduate school at UC Berkeley and the former chief economist at the U.S. Office of the Comptroller of the Currency and economist at the Board of Governors for the Federal Reserve.
The political appointee who runs the Department of Labor may advocate for presidential policy priorities like labor laws, union rules or pension reform, he said. But the hard numbers on things like employment reports were 'considered out of bounds' for partisan tampering.
'That's one reason that financial markets pay so much attention to these data, because they are so informative and reliable and unbiased,' he said.
Now, that's at risk. Odysseas Papadimitriou, the CEO of WalletHub, said he saw this play out in his native Greece ahead of the country's debt crisis and economic collapse.
'The people responsible for the economic statistics were essentially political operatives' in Greece, he said. 'The government wanted to manipulate the stats to their liking. When the financial crisis came all of this changed. It's very concerning if we get to the place where we don't believe the stats.'
Trump's decision to remove McEntarfer 'is the most concerning of anything that he has done, economic-wise,' Papadimitriou said. If we 'come to the place where we cannot believe the statistics, then I believe that is an existential threat (to the economy). Investors will not believe what they see. Foreign investment will collapse because no one will know what the hell is going on.'
The president's pressure to replace Jerome Powell as head of the Federal Reserve is also a cause for concern. Like the BLS, the Fed is meant to operate outside of political whims, and if Trump installs someone there whose chief concern is keeping him happy, we could lose the progress we've made in the post-pandemic economy.
Another move that caused a stir Friday was Trump's executive order opening the door to putting higher-risk private equity and cryptocurrency investments into 401(k)s.
But those are risks to keep an eye on, not current reality. Collins said while there are a lot of things about the Trump administration that have him concerned about the near future of the economy, investors should 'tune out the noise' and stick to their long-term plan.
It's fair to assume the market will go down at some point. What the specific catalyst will be is really anyone's guess. Attempting to time the market — in this case, hedging your retirement plans on the American economy's downfall — rarely works out. You should diversify in a way that makes you feel comfortable about your capability to hang in there through a protracted dip until the markets come back up, which they historically always have.