2 Ways President Trump's Tariffs Could Affect Your Retirement Savings
President Donald Trump has made headlines for a lot of reasons since he took office on Jan. 20, 2025. One of those reasons is the tariffs he has proposed, some of which are already in place.
Some are worried that these tariffs could increase their living expenses today. But they could also have far-reaching consequences, especially for retirees. Here are two such consequences you may need to prepare yourself for.
Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Learn More »
1. Higher cost of living
If tariffs drive up costs, seniors may be forced to make larger withdrawals from their retirement savings than they expected to. This could be problematic, particularly for those who are already concerned about running out of money before they retire.
Larger retirement account withdrawals could also result in a larger tax bill if the money comes out of tax-deferred accounts like traditional IRAs and 401(k)s. You fund these accounts with pretax dollars, so you must pay taxes on your withdrawals when you take money out. This isn't the case for Roth accounts, which you fund with after-tax dollars.
2. Higher Social Security cost-of-living adjustments (COLAs)
When inflation is up, Social Security cost-of-living adjustments (COLAs) go up as well. On the surface, that sounds like a good thing. But there are two hidden costs associated with bigger COLAs.
The first is that larger COLAs could put you in danger of owing Social Security benefit taxes or owing more benefit taxes than you're already paying. This could result in you keeping less of your benefits than you expected because you may have to give a portion back to the federal government.
Larger COLAs also increase how much the Social Security Administration has to pay out over time. This is a problem because Social Security is already less than a decade away from insolvency. The faster average benefits rise, the sooner the program will run out of money to pay all scheduled benefits.
This doesn't mean the whole program will go away, though. Benefit cuts could happen, but it's more likely that Washington will reform the program to keep it going. However, the shorter the time to the insolvency date, the fewer options Congress has. This could result in unpopular reforms, like raising the full retirement age (FRA), to make up the funding shortfall.
What retirees can do
Most of President Trump's tariffs haven't been in effect long enough for us to know their long-term ramifications. So we definitely have to wait to see how things play out.
If you're worried about the tariffs upending your retirement budget, you may want to be a little more conservative with your retirement account withdrawal rate. You may also want to consult with an accountant to see if you could be at risk of owing income taxes on your Social Security benefits, so you can plan accordingly. These taxes become more common every year as average check amounts rise, so you could owe them this year even if you haven't before.
You'll also want to take another look at your retirement withdrawal strategy once the government has settled on its Social Security reforms. Any changes to Social Security could affect how much money you have left after taxes or withheld amounts and how much you'll need to get from other sources. You may need to adjust your budget to stretch your dollars further.
The $22,924 Social Security bonus most retirees completely overlook
If you're like most Americans, you're a few years (or more) behind on your retirement savings. But a handful of little-known "Social Security secrets" could help ensure a boost in your retirement income. For example: one easy trick could pay you as much as $22,924 more... each year! Once you learn how to maximize your Social Security benefits, we think you could retire confidently with the peace of mind we're all after. Simply click here to discover how to learn more about these strategies.
View the "Social Security secrets" »
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Winnipeg Free Press
2 hours ago
- Winnipeg Free Press
Trump administration offers some details of how it would control US Steel, but union raises concerns
CALGARY, Alberta (AP) — President Donald Trump would have unique influence over the operations of U.S. Steel under the terms of the investment being made by Nippon Steel. Administration officials over the past few days provided additional insight into the 'golden share' arrangement that the federal government made as a condition for supporting the partnership. The Pittsburgh-based steel maker and Nippon Steel plan $11 billion in new investments by 2028 after indicating that they plan to move forward in a partnership. Commerce Secretary Howard Lutnick posted on social media on Saturday how the 'golden share' to be held by the president would operate, revealing that the White House is willing to insert itself aggressively into a private company's affairs even as it has simultaneously pledged to strip away government regulations so businesses can expand. Under the government's terms, it would be impossible without Trump's consent to relocate U.S. Steel's headquarters from Pittsburgh, change the name of the company, 'transfer production or jobs outside the United States,' shutter factories, or reincorporate the business overseas, among other powers held by the president. Lutnick also said it would require presidential approval to reduce or delay $14 billion in planned investments. That figure is higher than what the companies disclosed on Friday when Trump created a pathway for the investment with an executive order based on the terms of the national security agreement being accepted. 'The Golden Share held by the United States in U.S. Steel has powerful terms that directly benefit and protect America, Pennsylvania, the great steelworkers of U.S. Steel, and U.S. manufacturers that will have massively expanded access to domestically produced steel,' Lutnick posted on X. The president has the authority to name one of the corporate board's independent three directors and veto power over the other two choices, according to a person familiar with the terms of the agreement who insisted on anonymity to discuss them. The details of the board structure were first reported by The New York Times. Still, the full terms remain somewhat unclear. Nippon Steel has never publicly backed off the idea that it is buying U.S. Steel as a wholly owned subsidiary. On Sunday, the United Steelworkers, the labor union representing U.S. Steel employees, posted a letter raising questions about the deal forged by Trump, who during his run for the presidency had pledged to block any merger. Monday Mornings The latest local business news and a lookahead to the coming week. The union said it was 'disappointed' that Trump 'has reversed course' and raised basic questions about the ownership structure of U.S. Steel. 'Neither the government nor the companies have publicly identified what all the terms of the proposed transaction are,' the letter said. 'Our labor agreement expires next year, on September 1, 2026, and the USW and its members are prepared to engage the new owners' of U.S. Steel 'to obtain a fair contract.' If Trump has as much control of U.S. Steel as he has claimed, that could put him in the delicate position of negotiating the salary and benefits of unionized steelworkers going into midterm elections. ___ Levy reported from Harrisburg, Pennsylvania.
Toronto Star
4 hours ago
- Toronto Star
Mark Carney to meet Donald Trump one-on-one as world leaders arrive for G7 in Kananaskis
CALGARY — Prime Minister Mark Carney has a chance to make a breakthrough in talks to lift tariffs on Canada when he sits down for a one-on-one discussion with U.S. President Donald Trump Monday before the Kananaskis G7 summit kicks off. Carney has a dual mission as he hosts this week's meeting of the world's leading democratic economies: to lead talks that end in G7 consensus, not insults, on a gamut of global challenges, from the economy, and energy security, to international security. And, in his talks with Trump, to try to achieve a breakthrough on negotiations toward a 'new economic and security agreement.'
Calgary Herald
5 hours ago
- Calgary Herald
G7 world leaders arrive in Alberta amid Middle East crisis and global tariff uncertainty
Article content BANFF, Alta. — The heads of the world's richest economies are converging on Alberta today for one of the most high-stakes G7 meetings in recent memory amid a U.S.-led global tariff war and the growing crisis in the Middle East. Article content On many of the G7's key issues — namely the global trade war and Israel's military operations in Gaza — Trump and the rest of the G7 leaders are largely on opposite sides. Article content Article content Article content Article content On top of global issues such as Russia's illegal invasion of Ukraine, ongoing Israeli military campaigns in Gaza and now Iran and the U.S.-led reshaping of global trade via sweeping tariffs, Carney will have to contend with the volatility and unpredictability of American President Donald Trump. Article content According to a schedule published by Carney's office Sunday, the prime minister will meet Trump during a bilateral on Monday morning. It will be the first tête-à-tête between both men since Carney travelled to Washington last month. Article content On many issues including trade and the Israel-Hamas war, the G7 summit is like a game of tug-of-war. Pulling on one side are the leaders of the U.K., France, Italy, Japan and Germany, and pulling on the opposite side is Trump, with Carney in the middle of the rope trying to keep it from ripping. Article content Article content The fact that the longtime Iran-Israel conflict has pivoted from proxy wars to full-on conventional war in the last few days makes Carney's job even more difficult. Article content Article content 'It makes the already very difficult job of Prime Minister Carney to manage the G7 even more difficult. It adds another layer of risk and complexity,' said Thomas Juneau, a national security researcher and professor at the University of Ottawa. Article content Seven non-member countries also attending the G7 from the sidelines: Australia, Brazil, India, Mexico, South Africa, South Korea and Ukraine. Delegations from NATO, the UN and the World Bank will also be present. Article content On the eve of the summit, Carney had a first G7 bilateral with U.K. Prime Minister Kier Starmer during which the men dined and then watched the Edmonton Oilers play the Florida Panthers.
