November 16, 2020
What the 2020 Election Results Mean for Your Retirement
Find out what changes the next four years might bring when it comes to your retirement, and the best steps you can take to make sure your retirement plan is solid.
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With the tumultuous year of 2020 coming to a close and the polls for the presidential election indicating a transition to a new administration, we’re reviewing what changes may be on the horizon for the millions of retirees across the United States.
For years, politicians both in Washington, D.C. and on the local level have acknowledged that the growing number of older Americans need better retirement security, and Joe Biden took to the campaign trail to address his plans. Check out what Biden is hoping to accomplish in office in areas ranging from retiree healthcare to Social Security.
The President-Elect’s Plan for Older Americans
On his website, Joe Biden outlined a comprehensive “plan for older Americans.” Here are some of the highlights:
Lowering Prescription Drug Prices:
Consumers across the country are desperate for prescription drug prices to drop. Americans spend about $1,200 per year on medications, more than any other nation, and those numbers aren’t dropping. The Centers for Medicare and Medicaid Services (CMS) expect Americans to be paying $1,635 per person by 2027. And that’s if you remain relatively healthy. Costs quickly shoot up if you’re dealing with chronic conditions like diabetes, which affects an estimated 33% of people older than 65. The cost of the many types of insulin that diabetes patients need to survive has about tripled in the last decade alone, causing some people to dangerously ration their supply. Biden’s plan for lowered drug costs for older Americans would repeal the current law that bars Medicare from negotiating lower prices with pharmaceutical corporations. That would give Medicare more power to use its leverage to offer lower prices.
$5,000 Tax Relief for Caregivers:
Caregiving is a giant financial burden for the many Americans (often women) who care for their elderly parents. Out-of-pocket costs for caregiving can cost families $7,400 per year, and jump to $12,700 if the caregiver lives more than an hour away from the care recipient. Plus, if a caretaker quits their job or forgoes entering the workforce in order to take on those duties, it can cost them an average of $324,000 over the long term, between lost wages and losing out on eventual Social Security benefits. Biden is proposing a small dent in that by providing informal caretakers with a $5,000 tax credit. We hope that this is the start of a larger reform to support the growing community of caregivers.
Relief for Workers over 65 Who Remain in the Workforce:
Biden highlighted a need to better protect the 1 in 4 Americans over the age of 65 who decide not to retire (some by choice; some by necessity). He supports bipartisan legislation that cuts back on age discrimination in the workforce and that will expand the Earned Income Tax Credit (EITC) to workers older than 65. Currently, the EITC allows lower and middle-class workers to receive a tax credit if they earn between $15,570 and $55,952, depending on the size of their household. However, this benefit currently ends when a worker turns 65. Biden’s plan would expand it to workers over that age, incentivizing both the older workers who want to work at least part-time for their own enjoyment or sense of purpose, as well as the people who are trying to save more money before they choose or are forced to retire. Whether it’s part-time work or working into your late 60s, we are encouraged to see the focus on modernizing tax credits to reflect the reality of modern retirement.
Better Social Security Benefits for Widows and Widowers:
Social Security makes up over 50% of the average American retirement income. It remains to be the largest retirement asset for most Americans. Too often, losing a spouse means losing out on the Social Security benefits that their late partner worked for years to provide. And since 70% of 75-year-old women are divorced, single, or widowed (compared to the 22% of men who find themselves alone at 75), women are often the ones who lose out on benefits. In the case of widowhood specifically, Biden’s plan would allow surviving spouses to receive about 20% more than they would now from their late spouse’s benefits plan. In a post pension world, Social Security is the foundation of longevity insurance for the American retiree. Modernizing Social Security will be essential to securing retirement in America. Calculate your benefits to see how your Retirement Score changes.
Additional Government Initiatives
While the parties may differ on many policy initiatives, it seems like retirement is one place where both parties agree that reform is needed. There is bipartisan support to improve retirement security on a variety of different fronts. In October, Representatives Richard E. Neal and Kevin Brady introduced a bipartisan bill called Securing a Strong Retirement Act. Some of its goals include:
Right now, starting at the age of 50 you’re often allowed to contribute extra money per year to funds like 401(k)s or IRAs in order to really beef up your retirement savings. The proposed bill would increase IRA catch-up limits from $6,500 per year to $10,000.
Increasing RMD Age:
Currently, starting at age 72, you may be required to take a minimum distribution from your IRA. This bill would raise that age to 75, protecting the people who want to wait to touch their IRA savings (though if you do want to withdraw some of your money, you’re still able to). You’d also pay less of a penalty if you fail to take your RMD.
Increasing QLAC Limits:
Seniors are living longer lives, and this bill aims to protect them from depleting retirement savings too early. You can currently purchase qualified longevity annuity contracts (QLACs) that guarantee you an income later in life. Right now, that type of annuity fund is limited to $135,000; this bill would up that figure to $200,000 in order to add extra padding to long-term savings.
What does this mean for me?
No big policy changes have been set in stone yet, but you can use this information to revisit your retirement plan and anticipate the best ways to save and prepare for any future changes. Here are some of the steps you can take to optimize for retirement:
- If you want to take advantage of the Part D Medicare plan that could lower your premiums and insulin copays, you have to opt in. Medicare open enrollment is currently underway until December 7, so now is the time to shop around, see if you’re eligible, and decide if the new Part D Senior Savings Model is the best plan for you. If you don’t qualify for that plan, you can look into cards like Hippo that help you save 97% on prescription drugs from every pharmacy.
- Don’t panic about how Biden’s win will affect the stock market. It’s normal to see some market volatility during election season (especially now that it’s coupled with the uncertainty of a pandemic). But history shows us that the market typically bounces back quickly, and that from 1860 to 2010, stock market returns were nearly identical during Republican and Democratic presidencies (8.2% return per year versus 8.4%, respectively). Experts agree that continuing to make solid contributions to savings like 401(k)s is a smarter move than prematurely pulling all your cash.
- Check in with your retirement savings accounts. See if there are any catch-up contributions you’re missing out on, and keep your eye on the news to note if legislation passes that ups those limits.
- Calculate your Retirement Score using the Silvur app. Silvur keeps track of every policy change that has the potential to impact your golden years, so it’s always helpful to continually check back in and find out how long your current level of savings can fund your retirement. The app allows you to figure out how spending less on prescription drugs could help to increase your score, and gives you an idea of what your Medicare bill might look like if you’re planning to move when you retire. The presidential elections are always a reminder of change, and Silvur is here to help guide you through those changes so that you’re fully prepared for a happy and healthy retirement.