I am worried about the investments I have for retirement. We had to use nearly all of our savings to pay for my late husband’s medical bills. I realize that I am far, far more fortunate than most people, although I don’t qualify as “rich.”
My home is paid off, and is worth about $425,000. I also have a one-bedroom condo unit which is now finally paid off, and is worth about $240,000. This is rented out. After expenses (property tax, HOA fees, insurance, etc.) I take home $1,000 a month.
When my parents died (after my husband’s passing) I inherited about $100,000, which is now in a low-risk investment portfolio. I am in the non-profit sector and earn around $50,000 annually for consulting work, which I have in addition to my rental income.
‘I am very afraid of what the next four years might bring.’
I plan to keep working as long as possible, even if I drop down to part-time after several years. My lifestyle is pretty simple. I like to visit family or friends a couple of times a year, so an occasional airline flight is my big splurge. I hike and go to the beach.
I am considering selling my rental. I am 62 and want a secure retirement. I am very afraid of what the next four years might bring. Should I sell my rental and invest in something else? Should I invest my $100,000 differently?
Do I downsize, move into the rental, sell my home and invest that? Or stay put and get a reverse mortgage when I am ready to semi-retire, hopefully when I am eligible for full Social Security — if there even is Social Security after Trump takes office?
Sleepless
Related: ‘I’m convinced the U.S. will be drawn into World War III’: How do I prepare my finances?
Dear Sleepless,
Don’t allow your emotions and political views to dictate your finances. You write that you are “worried” about a recession after Trump takes office. You say that you are “afraid” of what the next four years will bring. Take a deep breath and go for a long hike. Fear is not a reason to make a financial decision, least of all two of the biggest moves you could make — selling an income-generating property and making an impulsive decision to re-invest your $100,000 inheritance. If you have a low risk tolerance, I would say the money is where it belongs.
Trump will inherit, by most measures, a strong economy from President Biden. Inflation has finally cooled after economists worried that the economy was overheating, with the consumer-price index currently running below 3%. Unemployment hovered at 4.1% in December. Gross domestic product growth in the second quarter outperformed many economists’ more pessimistic expectations due to persistently high interest rates and worries about the cost of living on everything from eggs to real estate.
That said, we are all living in a question mark. “Markets have been re-pricing the prospect of Federal Reserve rate cuts this year in the wake of more hawkish Fed commentary,” according to ING, a global bank and financial-services company. Recent data suggests “the economy is maintaining its strong momentum and that inflation continues to be sticky with concern over tariff implementation starting to impact corporate thinking and behaviour,” it added, and a “clean election outcome” will help kickstart delayed investment decisions and hiring.
Take a deep breath and go for a long hike. Fear is not a reason to make a financial decision.
Social Security is another unknown. Trump has said not one “single penny” will be cut from Social Security during his tenure, but it’s hard to know whether he will stick to that plan. Others say even that seemingly cut-and-dry statement is open to interpretation. The program has continued supporting retirees since 1935 and there is certainly the will among the American people for that to continue. That said, it’s expected to run into insolvency issues by 2035, just in time for its centenary, according to the Social Security and Medicare Board of Trustees. This seems to be an issue independent of who is in power.
With a new administration, everything changes and yet stays the same. The stock market, based on historical data, will likely continue to rise. The housing market, notwithstanding a massive recession, will also remain robust. The share of houses seriously underwater — where the price is worth less than the mortgage — was less than 3% last year, compared to 26% during the subprime mortgage crisis in 2008, according to HousingWire. That’s not to say that the 30-year mortgage rate, now 6.9%, is not weighing on the housing market.
Trump’s victory brings some clarity with a Republican trifecta — his party will control both the Senate and the House of Representatives. He will have an easier time passing his agenda, which will likely include looser regulation for the financial and corporate sectors, a clamp-down on immigration and some visa programs, corporate tax cuts and tougher trade tariffs. While economists expect this to increase economic growth, it will come at a price, namely raising the cost of imports. Economists say this will have an adverse effect on the labor supply.
It’s a mixed bag whether you are a CEO, retiree or white/blue-collar worker.
Some market participants say real-estate investment trusts are more attractive than bonds due to higher relative yields, noting their diversification and liquidity, meaning you can access your cash more easily than many other investments. (Read more about four REIT stocks that pass a strict quality screen here.) Looking at global stock markets between 1971 and 2024, Vanguard said the impact of U.S. presidential elections on stock markets has historically been “minimal.” Other geopolitical events, interest rates and, yes, natural disasters have an impact too.
You don’t reveal the return on your $100,000 investment. You can still get CD rates of up to 4.6% in January. With CDs, you are committing to a set period of time. The rate can change with high-yield savings accounts, based on the Fed’s benchmark rate. When you buy a CD, the rate does not change. High-quality fixed income and Treasuries typically perform as interest rates start to decline from a recent peak. Buy an annuity if you are looking for a guaranteed income, but pay close attention to their fees. Consult an adviser about a reverse mortgage.
It’s a mixed bag whether you are a CEO, retiree or white/blue-collar worker. As to your question (or fears) about a recession, no one knows. Bad things happen all the time, as we recently saw with the fires that swept through parts of Los Angeles. Trump, whether you voted for him or not, will introduce a rake of pro-business policies (deregulation, tax cuts and an increase in oil and gas exploration among them). They won’t all happen overnight. They will take time. Sit tight on top of that mountain, and enjoy your journey into retirement.
Related: Should I wear my Trump MAGA hat to work?
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