The financial market is expansive and can change overnight. NextAvenue.org recently wrote about several important ways retirement is likely to change in 2017 that could impact millions of people and require you to engage in or reevaluate your estate planning. According to the article, several things you should pay attention to include:
Tax Cuts Are Likely
Tax laws are continuously changing, and the new administration has proposed some rather significant changes to the tax code. If these changes become a reality, it may important for people to look at investments like their IRA and convert it to a more tax-friendly asset, like a Roth IRA. This can help investors and those planning retirement accounts to take advantage of more favorable tax consequences that could help them keep more of their money in the long run.
There Could Be a Higher Standard Deduction
Along with potential changes to the tax rate, standard deductions for both married couples and individuals could change. This can impact a lot of decisions that you may make that have tax consequences. If the standard deduction were to more than double, it may be less appealing to itemize deductions. In such cases, people may be more willing to give up deductions like the one for mortgage interest. In turn, this may make the decision to sell a house and rent instead a bit easier for people considering doing so.
Interest and Mortgage Rates Could Rise
It is unclear how the new administration will handle interest and mortgage rates in the long-term, but the article notes that the Federal Reserve increased its key interest rate in December by 0.25 percent. The article also mentions that while the future of these rates is uncertain, some experts believe the new administration will be aggressive in raising them. This could have a significant impact on your financial portfolio.
Mutual Fund Risks May Grow
Many changes may happen this year in various markets. The article explains that some experts believe real estate investment trusts could be affected if interest rates rise, causing them to struggle more in the future to maintain gains. Especially in funds targeting one industry, including potentially volatile ones like real estate, the risk of decrease in value could become greater as the year progresses.
Bond Values May Decrease
At the same time, bond values may decrease more quickly because interest rates tend to have a more immediate effect on such rates. Generally, a bond is issued to a buyer and the issuer pays a fixed interest rate on that bond. When interest rates rise, bonds purchased at lower interest rates are not as appealing when an individual tries to sell them and may cause your bond investments to decrease in value.
Cost of Healthcare Likely to Rise
The article mentions that experts are relatively sure that healthcare costs will rise, regardless of where you get your healthcare from. In fact, they recommend budgeting anywhere from $1,000 to $1,200 per month for premiums, deductibles, and various other out-of-pocket healthcare expenses that could arise. There appears to be a trend toward rising healthcare prices, and individuals should take note and plan accordingly.