4 Reasons Your Retirement Savings Won’t Be Enough If Harris Wins

American voters are concerned about how the outcome of this year’s presidential election could impact their financial future, especially their retirement savings.

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Vice President Kamala Harris and former President Donald Trump have vastly different views on the role the government should play in taxes, inflation, investments, and health care — all factors that affect retirement savings.

“Presidential elections may have a big impact on commercial interruptions, but typically have a minor impact on retirement plans,” said Paul Tyler, a retirement planner. “Consistent savings and investment habits over a long period of time outweigh any short-term distractions of election year politics.”

GOBanking Rates talked to economic experts about four reasons your retirement savings won’t be enough if Harris wins in November.

You’re a High-Income Earner

Historically, Harris supported using changes in the tax code to remedy the economic gap between the rich and poor by increasing income taxes on earners making over $400,000 a year.

For example, Harris is likely to continue a Biden-era proposal to increase the top individual income tax rate to nearly 40%. That change would affect single filers making over $400,000 and joint filers earning over $450,000.

The Vice President said the additional revenue would be used to fund social support programs such as expanding Medicare and Social Security benefits for low-income older adults and persons with disabilities.

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You Rely On Investment Income

A Harris-Walz Administration would include a higher tax rate on capital gains, which could affect those who heavily rely on investment income.

According to a Fidelity Investments analysis, Harris could also continue a Biden-era budget proposal of “taxing qualified dividends and long-term capital gains at ordinary income rates, including a top rate of 37% or 39.6% if the top rate is increased.”

The capital gains tax rate could get close to 50% if you add in the state tax rate, said Jeff Griffith, an economist at the Heritage Foundation.

“One of Vice President Harris’ most troublesome proposals is raising the capital gains tax,” Griffith said. “If you have been saving for retirement, it could hit you hard if you were to go ahead and cash out.”

Also, if you earn $1 million or more in annual income, you will pay a minimum 25% tax rate on capital gains instead of the current rate of 23.8%. Taxpayers with a net worth of $100 million would include capital gains as part of their income, regardless of whether the money is realized or not.

You Have a 401(k) or IRA

According to Fidelity Investments, Harris may support Democratic proposals to curtail or end a “back-door” Roth IRA conversion that allows high-income earners to make nondeductible contributions to a traditional IRA and then convert those funds into a Roth IRA.

In addition, the value of your IRA or 401(k) could be reduced if Harris’ plans to increase corporate tax rates are enacted.

Under Harris, corporations would see their tax rate increase from 21% to 28%. Large corporations could also get a tax hike from 15% to 21%, regardless of the deductions, and a higher rate on foreign income.

While corporations are paying the increased tax bill, it could affect your retirement income because higher corporate taxes could lead to lower profits, smaller dividends, and slower market growth. All of these factors play a role in how much your 401(k) or IRA is worth.

“Even for those of us who are not wealthy or own stocks, that leaves less capital in the economy, which means fewer resources to invest in research, development, and new businesses,” Griffith said.

Inflation

Americans are paying more for daily essentials like groceries, gas, and housing. Harris has unveiled a number of measures to offset inflation, including:

• Institute federal price controls on food.

• Crackdown on mergers and acquisitions among large food industry producers.

• Provide $25,000 to certain first-time homebuyers for a downpayment on a house.

However, Tax Foundation economists said Harris’ government spending proposals will cost more than $2 trillion over the next decade.

“…Putting pressure upward pressure on inflation to the extent they are deficit-financed and leading to a further prolonging of the Federal Reserve’s high interest-rate stance,” economists said.

Even moderate inflation can boost the cost of essential goods and services for retirees and those nearing retirement if their income doesn’t correspondingly increase.

“If you and your financial advisor determined that you needed $1 million to retire next year and your inflation projections were off by 15 percentage points, you’re more than $100,000 shy of what you need to retire, even if on paper you have $1 million,” Griffith said.

Your Health

Healthcare costs tend to rise as you age, and these expenses can significantly drain your retirement savings. In fact, about 3 million Americans owe more than $10,000 in medical debt.

Harris pledged to work with states to cancel $7 billion of medical debt for up to 3 million Americans and negotiate with pharmaceutical companies to lower prices for the most expensive and commonly used drugs.

But will those measures go far enough to offset your retirement savings?

“If Kamala Harris wins, her prior support for broad health care services for all Americans may alleviate one of the biggest worries in retirement,” Tyler said. “However, the funding may come from reduced benefits from retirees with higher income. If you fall into that category, you may want to spend time with an advisor to understand how to generate more predictable income from your own savings.”

_{Editor’s note on election coverage: GOBankingRates is nonpartisan and strives to cover all aspects of the economy objectively and present balanced reports on politically focused finance stories. For more coverage on this topic, please check out How a Trump Win in 2024 Could Impact Your Retirement Savings}

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This article originally appeared on GOBankingRates.com: 4 Reasons Your Retirement Savings Won’t Be Enough If Harris Wins