Jobs and wages. Taxes and Social Security. Student debt and retirement. Child care.
These are just a few of the crucial areas in which the policies of the next president will affect the financial security of all Americans, and on which ABC’s Martha Raddatz and the town hall audience is likely to quiz Hillary Clinton and Donald Trump in the next debate.
Here’s a cheat sheet laying out the two main candidates’ positions on some of these issues and, since there’s no time like the present, tips on shoring up your finances no matter who wins.
Jobs and wages
The Democratic candidate vows to narrow the income gap. Her campaign promises “the largest investment in good-paying jobs since World War II,” including a $275 billion plan to rebuild U.S. infrastructure, the creation of jobs in alternative energy, and support for small manufacturers and startups. Clinton would pursue “smarter, fairer, tougher trade policies that put U.S. job creation first,” work with organized labor, gradually raise the minimum wage from $7.25 to $12 an hour, and support efforts by cities and states to raise that minimum further, citing the “Fight for $15.”
Trump also talks of raising the standard of living and says his policies will make America “the best place in the world to get a job” but stresses getting out of the way of economic growth. That means rolling back regulations on energy and other industries, reworking trade agreements that “create a smaller economy for everyone,” overhauling the tax code, and raising barriers to immigration. Trump wants to spend more than $500 billion on infrastructure. He has said the minimum wage should be up to the states but has also talked about a $10-an-hour federal floor.
You and your money
Raising the minimum wage could cost us jobs, some argue. The Congressional Budget Office, in a 2014 analysis, noted that “business owners would see reductions in real (inflation-adjusted) income, as would consumers, who would face higher prices as a result of the minimum-wage increase.” The article “Minimum Wage Mythbusters,” on the U.S. Department of Labor’s website, says raising the minimum has ”little to no effect on employment as shown in independent studies from economists across the country,” citing research showing that “higher wages sharply reduce turnover which can reduce employment and training costs.” Moody’s Analytics concluded in a macroeconomic analysis of Clinton’s economic proposals that the “negative employment affect” of a higher minimum wage would be modest, since the floor would be phased in over five years.
Whether or not you are directly affected by the minimum wage, its role in the economy and the candidates’ broader prescriptions for wage and job growth have implications for your working life and your retirement.
What you can do
Guard against lifestyle inflation that can easily creep into your spending. Tamping it down early on, to add to your savings, can pay off handsomely in the long term, since most big raises come earlier in your career. Gains slow in your 40s and 50s, and in your 50s income growth, adjusted for inflation, generally turns negative, according to financial planner Michael Kitces. With less earning power ahead of you and your options to deal with savings shortfalls narrowing, you may have to make painful spending cuts or reduce your expectations for retirement.
So if economic growth picks up, and with it your pay, try to keep your spending the same. Kitces suggests setting a lifestyle spending target — how much you want to be able to spend per year in retirement — rather than framing it as saving 10 percent or 20 percent of current income. Because he aims to save the equivalent of his annual spending times 30, he looks at everything he thinks about buying as costing 30 times as much as it does.
In this Jan. 11, 2013, file photo, the Social Security Administration’s main campus is seen in Woodlawn, Md. More than 60 million retirees, disabled workers, spouses and children rely on monthly Social Security benefits. That’s nearly one in five Americans. The trustees who oversee Social Security say the program has enough money to pay full benefits until 2034. But at that point, Social Security will collect only enough taxes to pay 79 percent of benefits. Unless Congress acts, millions of people on fixed incomes would get an automatic 21 percent cut in benefits. (AP Photo/Patrick Semansky, File)
Clinton would seek to modestly expand Social Security, increasing benefits for widows and giving credits to workers who take a job leave to care for family members. To raise funds for the program, she would increase the level of annual wages subject to payroll taxes; in 2016, wages aren’t taxed after $118,500. According to a 2014 analysis by the Center for Economic & Policy Research, the wealthiest 6.1 percent of workers would pay more if the cap were removed.
Clinton opposes reducing cost-of-living adjustments to Social Security benefits, attempts at privatization, an increase in the retirement age, and any attempts “to close the long-term shortfall on the backs of the middle class.” She has vowed to oppose any Republican plans “to privatize or ‘phase out’ Medicare as we know it” and has said she would work to drive down drug prescription costs.
Trump tweeted in May of last year that he was “the first & only potential GOP candidate to state there will be no cuts to Social Security, Medicare & Medicaid.” Growth from implementation of his economic policies would “shore up our entitlement plans for the time being,” he has said. Yet he has also noted that “as our demography changes, a prudent administration would begin to examine what changes might be necessary for future generations.”
You and your money
With defined-benefit pension plans fast receding and many workers without defined-contribution plans such as 401(k)s, Social Security income is more important than ever for more people — even as it isn’t nearly enough for most of us to realize our retirement plans. Clinton’s plan for payroll taxes would mean a pay cut for anyone making over $118,500; right now, anyone making $237,000 a year, or twice the cap, stopped paying payroll taxes on earnings on July 1.
But if changes aren’t made to shore up the program’s finances before 2034, automatic reductions in benefits will kick in, with claimants getting just 75 percent or so of their scheduled benefits.
What you can do
Regardless of how the Social Security program evolves, many people aren’t clear on how to get the biggest benefit out of it. That’s why “Get What’s Yours,” a guide to maxing out Social Security benefits by the economist Laurence Kotlikoff, became a bestseller. One of his co-authors, Philip Moeller, has the same sort of book coming out in early October, on getting the most out of Medicare.
Studying the rules can ensure a more comfortable retirement. For example, if you were born after 1943 and wait to claim benefits after the full retirement age (67 for anyone born in 1960 or later), benefits rise 8 percent a year until age 70. Try finding a safe 8 percent return anywhere else. One of the smartest moves to prepare for the cost of retirement, even if you can’t save much now, is something many younger savers are already doing — simply staying fit and healthy. Unexpected health-care costs can derail the best-laid retirement plans. (And, though it’s just a correlation, men who worked out three or more times a week made about 6 percent more than men who didn’t, according to a 2011 study from Cleveland State University. The gap was about 10 percent for women.)
Related: Donald Trump, your 401(k) adviser
Clinton’s tax policy targets increases on high earners while Trump would simplify the number of tax brackets, effectively lowering taxes on the highest earners. (Photo: iStock)
Clinton isn’t fiddling with the marginal tax brackets but would raise taxes on high earners in a variety of ways. Her plans include a minimum rate of 30 percent for anyone with income of more than $1 million, a 4 percent surcharge on gross adjusted income over $5 million, a $1 million limit on the lifetime gift exemption, and a new tax schedule on capital gains rates. A cap on the amount of savings from itemized tax deductions would limit them to 28 percent of the value of the deduction. So those in higher tax brackets wouldn’t get a greater benefit from, say, taking the mortgage interest deduction, the Tax Foundation notes.