Here's What Financial Planners Are Telling Clients After the Midterms
As you may have heard, Democrats won control of both chambers of Congress in this month’s midterm elections. But what does a divided government mean for your retirement savings?
If you have money in a 401(k) account, IRA or investment portfolio, you may be wondering what happens next with taxes, investment returns and retirement income.
Be Aware: What the Midterm Results Could Mean For Your Money Before 2027
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Financial planners say the results could affect everything from tax policy to technology stocks. Here's what you should know.
Watch for Policy Changes
Democrats now control Congress, but President Donald Trump can veto legislation they pass, including changes to retirement tax policies.
“With a Republican president and Democrats controlling Congress, sweeping legislation will be difficult,” said Christopher Stroup, a certified financial planner and founder of Silicon Beach Financial.
Still, Stroup said retirement savers should watch proposals involving individual and corporate tax rates, capital gains, retirement savings incentives and Social Security.
He recommends paying attention to possible changes in investment regulations and opportunities to save on taxes rather than worrying about major policy changes that may never happen.
Assess for AI Exposure
According to Reuters, the stock market rallied the day after the midterms, with the Dow rising approximately 3% and the S&P 500 gaining 1.6%.
However, AI-related investments faced pressure amid concerns about potential regulation under the new Democratic-controlled Congress.
“The biggest concern investors have is how Democrats will regulate AI and data centers,” said Chris Dixon, a registered financial consultant at Oxford Advisory Group. “AI is responsible for a large portion of market gains and any uncertainty in that industry will likely cause volatility.”
Dixon advised diversifying retirement investments to avoid having too much money tied to one industry.
Review Your Inherited Investments
Another area financial experts say they are watching is whether Democratic lawmakers will revisit proposals to limit or eliminate the step-up in basis, a tax break on inherited assets.
Under current rules, when someone inherits stocks, real estate or other assets that have increased in value, they generally won't owe capital gains taxes on the growth that occurred before the original owner died.
However, Jared Remesz, a certified financial planner (CFP) and co-founder at Bloomfield Hills Advisory, said proposals to eliminate or limit this tax break have surfaced before as a way to raise government revenue, particularly from wealthier households.
If the rule changed, heirs could face a larger tax bill when they sell inherited assets.
“Under a divided government, turning that idea into law would still face a high bar,” Remesz said. “But it is the kind of concept that can appear in legislative messaging or future negotiations.”
Check Your Portfolio
With Democrats controlling Congress, lawmakers could revisit energy policy, healthcare regulations and technology oversight, potentially affecting companies in those industries.
But before changing your investments based on which industries might benefit or suffer, consider what you already own.
“Someone might hold a broad stock fund, a growth fund and individual technology stocks without realizing how much they overlap,” said Troy Fore, CFP and director of client engagement at Aspen Wealth Management.
That overlap could leave retirement accounts more vulnerable to losses, especially if concerns about AI regulation trigger a technology sell-off.
Fore recommends reviewing your investments to understand how much money you have tied to particular industries rather than trying to predict which ones will benefit from the election.
What Matters Now
So, should you change your retirement strategy because Democrats won Congress?
Fore said the answer depends more on your financial circumstances than the election results.
If you’re approaching retirement, that means you could have enough cash and high-quality bonds to cover upcoming withdrawals without being forced to sell stocks during a downturn. Younger workers generally have more time to recover from short-term market swings and can continue contributing to their retirement accounts.
“Different stages of life call for different portfolios, regardless of who wins an election,” Fore said.
The election could influence future policies and market expectations, but Fore said earnings, interest rates, inflation, and the broader economy matter more to long-term investment returns than which party controls Congress.
Editor’s note on political coverage: MoneyLion is nonpartisan and strives to cover all aspects of the economy objectively and present balanced reports on politically focused finance stories.
This article was provided by MoneyLion.com for informational purposes only and should not be construed as financial, legal or tax advice.
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