What The Midterms Mean To Your Retirement

The Democrats won the House, the Republicans kept the Senate, and future retirees should be paying close attention to retirement legislation these next few years.

A split Congress isn’t the worst thing for retirees, but it may not be all that helpful either. With each party in control of a chamber, gridlock is bound to ensue on numerous issues, including Social Security and Medicare, retirement savings and pensions. Voters — even those who may be far away from retirement age — should pay attention to these issues, because legislation made now will be felt for decades.

Even though Democrats are now a majority in the House, any legislation they pass could still be vetoed by President Donald Trump. “He signs all big executive orders on the evening news, I can easily see him signing a bill with a veto message with the same big pen,” said Duane Thompson, senior policy analyst at Fi360, a fiduciary training and education organization. The Democrats would need two-thirds majority in both chambers to override the veto.

Even if Democrats secured the Senate as well, divided legislative and executive branches would likely see impasse in legislation, Thompson said. The good news: Both parties might find some common ground for retirement savings, and much of that bipartisan work could be done during the “lame duck session,” when Congress reconvenes after the election and before the new members are sworn in, Thompson said. A couple of introduced proposals have seen support from both parties, including the Retirement Enhancement and Savings Act of 2018 and the Family Savings Act of 2018.

What to expect

Pensions: Public pensions may have been saved this election. A few gubernatorial candidates had been particularly critical of pension plans, said Bridget Early, executive director of the National Public Pension Coalition, which represents teachers, nurses, police and other public sector workers. “The public pension issue is not an issue of benefits being costly,” she said. “It is really a question of budget priorities.”

Knute Buehler, Oregon’s Republican gubernatorial candidate who lost to Democrat Kate Brown on Tuesday, said during one debate that pensions were taking money away from school spending and the government should opt for a 401(k)-style plan instead. Brown retorted, but said public sector employees should contribute to some of their own pension costs and didn’t specify how much, according to Oregon Live. “I think it’s easy for a millionaire to say he’s going to cut the retirements of hardworking Oregonians. I’m not willing to do that,” she said. Colorado’s Republican candidate, Walker Stapleton, also argued for a private sector-like plan, though he lost to Democrat Jared Polis.

Not all states may be as safe. Stacey Abrams, the Democrat running for governor in Georgia, promised not to attack public pensions, but lost in a close race to Republican Brian Kemp.

Social Security and Medicare: Both parties have been quiet about Social Security and Medicare in recent months, said Jeff Fosselman, senior wealth adviser for Relative Value Partners in Northbook, Ill. Republicans have been heavily focused on immigration and the economy, while the Democrats have spoken primarily of health care. When discussing Social Security, however, Republicans have said they’d like to cut Social Security and Medicare funding, and extend the full retirement age for seniors, which would delay when retirees can claim full benefits, Fosselman said.

Social Security is completely funded for the next 15 years, and then it will be 93% funded for the next 25, said Nancy Altman, president of Social Security Works, an organization dedicated to expanding Social Security. Still, work should be done now to protect these programs — if not also expand them. “It is better to act sooner rather than later to restore people’s confidence and peace of mind,” she said.

Democrats having control of the House is a good thing for seniors, Altman said. They will highlight discussions of Social Security, holding hearings about the issues arising with these programs. That, in turn, will give Americans more context for coming elections.

Fiduciary rule: The Trump administration halted the Department of Labor’s fiduciary rule, the Obama administration’s law directing the financial services industry to act in clients’ best interests for retirement accounts, but it may come back now that Democrats have the House. The Department of Labor currently has the fiduciary rule on its priorities list for next year, but it the agency is likely positioning itself to adopt whatever regulation the Securities and Exchange Commission creates, Thompson said. “The DOL is very likely to give its blessing to the SEC’s new rule,” which is expected in the middle of next year, he said. The SEC has already been criticized with creating a watered-down version of the DOL’s fiduciary rule, however.

With a Democrat majority in the House, Representative Maxine Waters from California will become chair of the House Financial Services Committee, Nasdaq reported. In her role, she would probably push for tougher regulation. When the Trump administration first delayed the fiduciary rule in April 2017, she said it was a disservice to retirees. “I am extremely displeased that the Trump administration has delayed the fiduciary rule, which would finally protect seniors and hardworking Americans saving for retirement from unscrupulous and self-serving financial advisers,” she said. “This delay is unreasonable, unnecessary and harmful to millions of retirement savers.”

Investing in retirement plans: Gridlock is a good thing for the markets, said Devin Pope, senior wealth adviser at Albion Financial in Salt Lake City. The aftermath of midterm elections have historically been positive for markets, Keith Lerner, chief market strategist at SunTrust Advisory Services, wrote in a research report.

Retirement savers should review their retirement plan’s asset allocation and understand how they’re invested, but that doesn’t necessarily mean they should make adjustments. “Make changes based on life events instead of political events,” Pope said. “Try not to let your emotions control your investment decisions.”

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