The Election Is Over. What Should Investors Pay Attention to Now?

The election is behind us, and for investors, this is often when the questions begin.

What will the results mean for taxes? Social Security? Retirement planning? The economy? The markets?

Those are fair questions. But before making financial decisions based on what happened at the ballot box, I think it helps to step back and put the election in perspective.

Elections happen in two- and four-year cycles. A good financial plan is designed to last for decades.

That difference matters.

Elections Matter, but Keep Them in Perspective

Election results can affect our financial lives.

At Moffatt Financial Strategies, we pay attention to potential changes involving federal taxes, Social Security, retirement plans, required minimum distributions, estate and gift taxes, business taxation, charitable giving, and other areas that could affect a client's financial plan. 

But there's an important distinction between watching Washington and letting Washington drive your financial plan.

Think about taking a long road trip. You need to pay attention to traffic, weather, construction, and changing road conditions. Occasionally, you may need to change lanes or take a detour.

But you don't change your destination every time the road conditions change.

Financial planning works much the same way.

Start With the Destination

Over the years, I've had many conversations with clients after elections, and the question is often some version of the same thing:

“Derek, what should we do now?”

My answer is to back up for a minute.

Pause. Take a breath. And go back to what's most important to you.

What are your goals?

Have your long-term goals changed? Have your objectives changed? Has anything changed about what you want your money to accomplish for you and your family?

That's where we start.

Before deciding whether we need to change direction, we need to remind ourselves of the destination.

We don't want short-term changes in the markets, the political environment, or the emotions surrounding either one to dictate our long-term direction.

Instead, we anchor ourselves to the financial plan:

Where are we headed? What are we trying to accomplish? What does this money ultimately need to do?

Once we've established that, we can ask a better question:

Has anything changed that meaningfully affects our ability to reach those goals?

An election can change the political landscape overnight. But tax laws, retirement rules, and estate-planning laws don't necessarily change overnight. We want to respond to what actually changes rather than allow speculation about what might change to drive important financial decisions.

If something materially affects the plan, we adjust the plan.

But we begin with the goal, not the headline.

Keep Your Eyes on Where You Want to Go

That reminds me of something I learned the first time I went skiing.

I was on the bunny slope when the instructor gave me one wonderfully simple piece of advice:

“You tend to go where you're looking.”

Look down the slope toward where you want to go, and that's where you'll naturally head. Fixate on the tree you're trying to avoid, and you may find yourself heading straight toward it.

There's a pretty good investing lesson in that.

Headlines can become the tree.

Whether it's an election, a difficult week in the markets, or a dramatic prediction on television, it's easy to become so focused on what's happening today that we lose sight of where we're trying to go.

That doesn't mean ignoring our surroundings. A skier still needs to understand the terrain, and an investor needs to understand the financial environment.

But awareness shouldn't cause us to lose sight of our destination.

What Are We Watching Now?

We're paying attention to the election through a financial-planning lens.

The practical question is:

What could actually change that would cause us to revisit a client's financial plan?

We're watching several areas:

• Tax policy: Could changes create new planning opportunities involving income, retirement distributions, capital gains, or charitable giving?
• Retirement policy: Could changes to Social Security, retirement accounts, or required minimum distributions affect existing strategies?
• Estate planning: Could changes to estate and gift tax rules require us to revisit current assumptions?
• Business-owner planning: Could tax or regulatory developments affect succession, ownership transitions, or retirement strategies?
• Charitable giving: Could changes in tax law affect how families accomplish their philanthropic goals?

When the rules change, we evaluate the impact. If an adjustment improves our ability to achieve the client's goals, we make it.

Back to the Fundamentals

For investors wondering what to do today, my advice is straightforward: go back to the fundamentals.

Ask yourself:

• Does my investment allocation still reflect my goals and tolerance for risk?
• Do I have adequate liquidity for short-term needs?
• Are there tax-planning opportunities I should consider?
• Are my estate documents and beneficiary designations current?
• Most importantly, have my long-term goals changed?

Adequate liquidity can be particularly valuable because it can help prevent short-term needs from disrupting long-term investments. Election

Think of liquidity like the shock absorbers on your car. They're not there because every road will be rough. They're there because eventually you'll hit a bump.

A good financial plan should have some shock absorbers built into it, too.

Built for More Than One Election

Good financial planning isn't about pretending uncertainty doesn't exist. It's about building a strategy sturdy enough to live with uncertainty.

Your financial life may span many elections, administrations, economic cycles, bull markets, bear markets, and unexpected events.

The goal isn't to build a plan that works only if the next two or four years unfold exactly as expected.

The goal is to build a plan that doesn't require them to.

So yes, we pay attention to Washington. And when changes affect the plan, we adjust.

But we keep our eyes on where we're trying to go.

Because elections are measured in years. Your financial plan should be built for decades.

About Moffatt

Moffatt Financial Strategies (MFS) is a registered investment adviser.  Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies.  Investments involve risk and, unless otherwise stated, are not guaranteed.  Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Past performance is not indicative of future performance. 

MFS may discuss and display, charts, graphs, formulas which are not intended to be used by themselves to determine which securities to buy or sell, or when to buy or sell them. Such charts and graphs offer limited information and should not be used on their own to make investment decisions.