Brainy Chick Finance

Retirement

How the Presidential Election Could Impact Your Money

How the Presidential Election Could Impact Your Money

Watching the presidential elections always makes me think about my money. While there are a ton of important issues, I always relate it back to how is this going to impact me? And many of their positions and policies are focused around money or could impact my money in ways that I cannot control.

How the Presidential Election Could Impact Your Money

Regardless of which side you relate to most, regardless of who becomes President, their policies could impact your future. The presidential election could impact your money.

Taxes

Their economic policies could cost you money. If you are working towards earning more, you could move up a tax bracket, causing you to pay more in taxes. One way to circumvent this is to put your money in as many retirement vehicles as possible that will tax you in a lower income bracket today versus when you get closer to retirement.

Recommendation: Max out your 401k, max out a Roth IRA

Increase in interest rates

With interest rates so low, there is nowhere for them to go but up. What does that mean if you are looking to buy a home, car, or even student loans? Basically, with the historical all-time low rates, there could be a chance that the Federal Reserve will raise them in December. For a big purchase, every time that interest rate increases, you can feel the sting.

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Foreign Policy

While their decisions will impact foreign policy, and the outlook on foreign affairs, it could trickle down to the travel that you make.

Take for example, the Brexit vote a few months ago, not only did it affect foreign policy, but the pound is worth much less compared to the USD. In this example, if you are from the US and have any interest in traveling to England specifically, within the next year or so you might start to plan your trip. With the pound being down, our USD can go much further over there. Translation: it will be cheaper to travel and stay in England.

Oil Prices

Not to get too deep into the interconnectedness of the oil industry, but as of today, oil prices are relatively low compared to a few years ago. But that does not mean that they won’t fluctuate when a new President comes into term.

While your econ class might seem a distant memory, supply and demand does affect price, so you could see gas prices go up in the future. While prices at the pump might not seem like they change that much, a major jump like a $1/gallon could mean an extra $40 every time you fill up. And within a month, that can be close to $100 depending on your driving.

Recommendation: Evaluate your budget and if gas prices go up, can you budget support an equivalent to an extra tank of gas each month. If it can’t, look into cutting one thing out of your budget or look into how you can increase what you are making.

When it comes time to vote in November, make sure you look at how the policies could impact you and your wallet not just today but in the future.

The Difference Between a Roth IRA and Traditional IRA

Difference Between a Roth IRA and Traditional IRA

When talking about retirement, most have the 401k covered: they understand the concept and (hopefully) are contributing to it. Sometimes, a 401k is not enough when it comes to retirement. Do you know when you will retire? You might think about 55, but you won’t know until you get there. Do you know how much you will need when you retire? How much you will need to live on each year? Life style inflation as we get older becomes more realistic and chances are, you will like the lifestyle you have before you retire. When you take that step to stop working, you will want to make sure that you have enough in your account to sustain the retired lifestyle that you want.

If you want more of a retirement cushion, invest in a Roth IRA. A Roth IRA is an additional investment retirement vehicle that you can max out each year at $6,500 (if under the age of 59 1/2).

Roth means that when you retire, your distributions (what you take out of the account) is tax free. This option is great because it allows your money to compound (grow) tax free.

For example: Say your IRA account is at $100,000 when you retire. With a traditional IRA, when you take the money out of your account, you will be taxed on the amount that has grown ($100,000) versus the $5,600 you put in during your 20s. Essentially, with a Roth IRA, you potentially get taxed less than with a traditional IRA.

Still confused? Check out this infographic that helps you sort out which option is best for you.

Charles Schwab put together this great infographic on whether a Roth IRA is right for you.

Difference Between a Roth IRA and Traditional IRA
Charles Schwab put together this great infographic on Roth IRAs.