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What Donald Trump Will Mean

for Americas Personal Finances


How Brokerage Firms Hide Fees



Executive Summary

Market Outlook with Americas Next President

Deep Dive: Trumps Plans for Americas Money

Social Security
Health care

Creating a Financial Plan That Withstands Political Change

How Brokerage Firms Hide Fees


Executive Summary
Election night finally came after a tumultuous year of Hillary
Clinton and Donald Trump battling, and Americans have
voted for Donald Trump to be the 45th president of the United
States. With a business mogul in the White House comes
questions about how markets will react and what changes
individuals can expect in their day-to-day financial lives, if his
policies are enacted.
Personal Capital developed this report to assess the shortand long-term market and personal finance implications of a
Trump presidency. This report includes an analysis of Trumps
policies on taxes, Social Security, education and health care to
help investors understand how their money may be affected,
with actionable advice on how to plan accordingly.
The bottom line: Investors should not let short-term
political gyrations drive their long-term financial priorities or
investment decisions.


Market Outlook with

Americas Next President
Whether an investor is thrilled to see Donald Trump become
President or wishes it would have been Hillary Clinton taking
over the Oval Office, Personal Capital urges Americans not to
let the election outcome impact their long-term investment
strategies. All elections stir emotion, but this one has been
more polarizing than most, potentially causing investors to
react emotionally in changing their financial plans.



The stock market has been volatile since election results
came in. As it became clear that Trump was winning, the
markets overseas tanked. S&P 500 futures were down the
maximum allowable 5 percent in after-hours trading. Dow
futures were down 750 points, a larger fall than right after
9/11. The Mexican peso plunged more than 11 percent
to a record low against the dollar. By the time markets
opened the morning after election night, however, most
of the fear had dissipated and risk assets recovered initial losses. US stocks opened just about flat. By the time
Hillary Clinton delivered her concession speech, US stock
markets were up over their Tuesday close. Any election,
particularly one with such divergent candidates, brings
with it a high risk of short-term volatility. And its possible
that the volatility continues over the short-term as investors digest the news.
Leading up to this election, the markets very short-term
moves generally reacted positively when Clinton gained
ground and negatively when Trump surged. This may
have occurred due to the uncertainty of electing an outsider candidate or one who is viewed as having less
predictable policy stances. But the framework of our

Constitution and the power of capitalism have proven

both brilliant and resilient. We dont have a prediction
about how Donald Trump will perform as President, and
there is no way to know which legislation may come to
pass. Trump brings both a new set of risks and a new set
of opportunities. Markets dislike uncertainty, so from a
purely rational standpoint his victory is likely to be a headwind in the coming months. That doesnt mean markets
will go down, it is just one factor. Corporate earnings, Fed
interest rate decisions, geopolitics and things we dont
even know about yet will be just as important.
Many investors are asking which party is better for stock
performance. Historically, stocks do slightly better in
election years when a Republican wins the election, but
fare much better in the first year of a new term when a
Democrat occupies the White House, as seen in the chart
below. This could mean that with Trump in the White
House, stocks may be poised for a dip in 2017, but there
is also some luck and timing in this. Most investors have
multi-year investment horizons, and consequently they
should not alter their long-term strategy based solely on
historical tendencies for a given one-year period.

Annual Stock Market Performance by President Since 1945




Democrat President Elected



Republican President Elected






Source: Ibbotson




A Trump presidency doesnt change long-term asset
class risk and return assumptions, and it doesnt change
assumptions any more than a Clinton presidency would
have. Historically, having a Democratic president in office
versus a Republican president has not had a clear impact
on market performance. The charts below show, as far
back as 1945, how the markets have performed under
both Republican and Democrat presidents.

What is clear is that neither partys leadership presents a

strong enough correlation to stock market performance
to dictate how investors should arrange their portfolio.
For investors who can avoid market timing and impulse
decisions, stocks generally do well regardless of party.
And if people are worried that either party is disastrous
to the economy or the market, there are 70 years of
evidence saying otherwise.

Annual Average Stock Market Performance by President Since 1945




























Source: CNN Money


Trumps Plans for Americas

Personal Finances
A new president can mean new policies on taxes, Social Security, education, and
health care hot topics that affect the personal finances of every American.
Personal Capital examined Trumps and the Republican partys policies around
these topics to help investors understand how their money may be affected, as
well as best practices around planning tax strategies, Social Security, and the cost
of health care and education.



Revise both the individual and corporate tax codes and

collapse the seven tax brackets into three


Make wealthy Americans pay their fair share, but not

at the expense of destroying jobs and undermining the
ability to compete



Maintain current social security system


Maintain current Medicare programs



Add an investment of $20 billion from federal dollars

toward education




Repeal the Affordable Care Act


Replace with Health Savings Accounts

Work with Congress to ensure universities make a good

faith effort to reduce college costs and student debt in
exchange for tax breaks


During his presidential run, Trump appealed to middle-income and wealthy voters with retirement
savings, and his plans outline tax deductions across the board. Trump wants wealthy Americans to pay
their fair share , but not at the expense of destroying jobs and undermining the ability to compete.
Additionally, he plans to reduce the cost of childcare by allowing families to deduct the average cost
of childcare from their taxes. For businesses, he plans to eliminate special interest loopholes, reduce
the tax rate from 35 percent to 15 percent, and eliminate the corporate alternative minimum tax in
an effort to keep more jobs in the United States.
Trump plans to revise both the individual and corporate
tax codes. He proposes collapsing the current seven tax
brackets into three. Married-joint filers with an income
of $75,000 or less will fall into the 12 percent bracket;
those earning more than $75,000 but less than $225,000
will fall into the 25 percent bracket; and those earning
more than $225,000 will fall into the 33 percent bracket.

Trump also plans to repeal the 3.8 percent Affordable

Care Act tax on investment income. Additionally, Trump
plans to increase the standard deduction for joint filers to
$30,000 (from $12,600) with caps at $200,000. For single
filers, the standard deduction would be $15,000 with a
cap of $100,000.



The likelihood of Trumps tax proposals actually being enacted relies heavily on his ability to work with
the Republican-led Congress and House Speaker Paul Ryan, who was not a strong Trump supporter
during the election. And while the Democrats maintain their minority status, the power of the filibuster
in the Senate could represent a challenge to Trump policies. Unlike a CEO of a major company pushing
through a corporate agenda, the President of the United States cannot enact widespread change on
his own accord. Enacting changes to the tax code requires much compromise. It will be wise to wait
and see what, if any, legislation is passed before significantly changing a tax strategy. Regardless, now
is an ideal time to review investments to make sure taxes are optimized. There are three main tactics
anyone can utilize to be tax-efficient:

Tax-Loss Harvesting
This means selling securities at a loss to offset other realized gains. While loss-harvesting
should be a year-round effort, investors have until December 31 to lock in losses. Even if
investors dont have realized gains for the year, they can claim up to $3,000 in losses as a
deduction. The use of individual securities within US stocks allows for significant tax savings
opportunities compared to ETFs alone.

Tax Allocation
This is the process of putting high tax-yielding assets in tax-deferred or tax-exempt
retirement accounts and lower tax-yielding securities in taxable accounts. Investments
such as high yield bond funds or REITs should go in IRAs, while municipal bonds, other low
yielding bonds and non-dividend growth stocks should typically be purchased in taxable

Tax Efficient Securities

Perhaps the most important tax optimization involves buying tax efficient securities. Usually,
this includes individual stocks or exchange traded funds (ETFs). Mutual funds are notoriously
tax-inefficient because they are forced to distribute capital gains even if those gains came
when an investor didnt even own the fund yet. Also, most active mutual fund managers are
much more concerned with the top line performance number than the less reported aftertax number. This can lead to high turnover and high capital gains even if fund performance
isnt great.


Social Security
Trump plans not to touch Social Security and plans to maintain current Medicare programs once he
is sworn into office. Throughout the election, Trump has stated that his plan to boost the economy
will take care of any long-term Social Security problems. Regardless, many experts remain skeptical
that Social Security can avoid either a reduction in benefits or an increase in taxes.
Approximately 10,000 Baby Boomers reach retirement
age daily, and that number will only increase when
Millennials the largest generation in the U.S. ever
enter retirement. In 2010, the Social Security trust fund
began spending more money than it received. Current
projections suggest it will not be able to make the full

payments promised starting in 2034. This means that

many Americans will not be able to live the American
Dream with the promise of retiring comfortably at age
65 if they are banking on Social Security to carry them
through their golden years.




With Trumps victory and the vagueness of his plans for Social Security in the future, it is important for
people getting close to the age where they will be receiving Social Security to maximize their benefits
on the assumption that no major changes to payouts will occur. For single people, that usually means
deferring receipt of payments as long as possible, assuming a life expectancy upwards of 80 years
old. For married people, it usually means the higher earning spouse (especially if that spouse is older
or a man) should defer as long as possible because whichever spouse lives longest will continue to
receive the highest benefit. It often makes sense for the other spouse to take benefits early (at 62), or
at the full retirement age (at 66).

Investors Over Age 60

It remains very possible that investors over the age of 60 will experience benefit reductions and that cost of living adjustments will be reduced to reduce the risk of Social Security insolvency. This reduced risk means investors over 60 should not take payments early
if they are only doing so out of fear that Social Security will dry up altogether.
Investors Age 40-60
For investors between 40 and 60 years old, given the current state of Social Security it
would be conservative to plan on a modest Social Security tax rate increase while still
working, and/or some reduction in Social Security benefits. Again, this is an estimate,
but a figure such as a 10 percent reduction in inflation adjusted benefits may be a good
working assumption.
Investors Under Age 40
Many people under 40 assume they will get no benefits, which may be too pessimistic.
However, to be prudent, it is wise to assume a 15 to 20 percent reduction in expected
benefits (based on current underfunding rate and the real possibility that Trumps economic growth targets are optimistic), or a higher Social Security tax rate on remaining
working years.



Trump wants to immediately add an additional investment of $20 billion towards education by
reprioritizing federal dollars. Distribution of this federal grant would favor states with private
schools, magnet schools and charter laws. He would also like states to follow suit, contributing
another $110 billion of their own education budgets towards school choice, which could
amount to $12,000 in school choice funds available to any K-12 aged child living in poverty.
Additionally, Trump plans to work with Congress to ensure universities make a good faith
effort to reduce the cost of college and student debt in exchange for tax breaks. With this influx
of federal money, it is Trumps vision that a two or four-year college education will be easier to
access and pay for.
The costs associated with Trumps education cost policies
may prove to be too high to be practical, and they may
not cover every American family who needs them.
Investors should still plan ahead if they hope to support
their childrens education, as they may not be able to rely
on federal support.




It is wise for investors to plan for education costs to be
close to what they are now, adjusted for inflation. Last
year alone, the College Board reported that published
tuition and fee costs had risen 3 percent since the year
before, and that was on top of very little inflation in
the rest of the economy. If Trumps plans for reducing
the cost of college dont kick in soon, parents hoping
to support their children through school are best off
making a plan now.

An appropriate average tuition cost to aim for is

$25,000 per year for public schools, and $40,000 per
year for private schools, in todays dollars. Parents with
infant or toddler-aged children who are saving with a
529 plan should aim for funding roughly 30 percent of
the expected cost upfront. $28,000 is a good starting
amount, since that remains under the annual gifting
limit (gifting limits are $14,000 per person per giftee and
$28,000 per married couple per giftee). Here is an easy
guideline to follow for how much should be in a childs
529 by age if the goal is to cover all or almost all college

529 Funding Chart

Suggested funding targets:
AGE 5-9
AGE 0-4






AGE 10-14








Health Care
Trump made grand campaign promises of repealing and replacing Obamacare. Hes said hed
replace the Affordable Care Act with Health Savings Accounts (HSAs). These HSAs are medical
savings accounts that allow individuals to save a portion of their income tax-free toward medical
costs. The accounts can roll over annually if not spent within the year. Additionally, Trump plans
to allow Americans to purchase insurance across state lines to create market competition. Again,
much like with tax reform, both houses of Congress must pass this legislation, and Trump must
sign it into law. Given the strong Republican opposition to Obamacare and the fact that they will
maintain control of both houses, health care reform looks likely.
If Trumps plan is enacted, investors should not expect health care costs (and especially prescription drug
costs) overall to get significantly less expensive. A 2016
study suggested that a 65 year-old retired couple will
need about $260,000 to pay for health care expenses
throughout their lifetime, an increase since last years
estimate of $245,000. This estimate assumes that the
couple does not have employer-provided coverage but

does qualify for Medicare. It does not include long-term

care or most dental services. Furthermore, the Employee Benefit Research Institute suggests that $376,000
is required to have a 90 percent chance for this couple
to pay all of their health care costs. The problem: most
Americans do not have $260,000 in total savings, let
alone that amount set aside just to pay for health care.




Most people entering or already in retirement should
plan on spending at least $250,000 for health care
expenses. The bulk of this will probably come toward
the end of life, which means that it gives an individual
more time to grow the assets that they will need to
pay for health care. However, health care inflation has
consistently been running faster than basic inflation,
so a plan is critical. A good resource to estimate health
care costs in retirement is the AARPs health care
costs calculator. By plugging in personal details like
age, health conditions, and target retirement date,
individuals will receive an estimate of how much they
can expect to receive through Medicare in retirement,
and any deficit they need to plan for on their own.
Note that while Medicare is a useful resource, it does
not cover all health care costs. For starters, it does not
cover dental or vision expenses. Also, Medicare Part A
and B offer different levels of coverage. Part A covers
hospital insurance, and Part B covers medical insur-

ance. Americans have to pay for Part B, and the cost

goes up the higher an individuals income is (with a
max of nearly $400 monthly for an individual with over
$214,000 in adjusted gross income or couples with over
$428,000 in adjusted gross income). Medicare.gov has
all of the information an investor needs about the program and also offers a place to sign up directly upon
turning 65 (or earlier for people with a disability or permanent kidney failure who are under 65).
If a person is retired, not yet eligible for Medicare and
has income that is between 100 percent and 400 percent of the federal poverty level (poverty level in most
states being $11,880 in annual income for an individual,
or $24,300 in annual income for a family of four), he or
she may be eligible for tax credits on a health insurance
policy purchased on a Health Insurance Marketplace.
This means careful planning in terms of distributions
from retirement accounts and when to start Social Security can save a lot of money on insurance.


How Brokerage Firms Hide Fees


Creating a Financial Plan

that Withstands Political Change

The 2016 election has spurred people across the country

to worry about both the short- and long-term market effects of the selection of the next US president. However,
while the market may react in the short-term to unique
political events, research shows that having a Democrat
or a Republican in the White House has not swayed markets or the economy greatly in the long-term (for better
or for worse).
Among Personal Capitals 1.2 million users, there were
spikes in dashboard and app activity during many critical points in the election (like Bernie Sanders losing the
primaries, days following the presidential debates, and
in the midst of the Republican and Democratic conventions), demonstrating that people are more concerned
about their money during political events. However,

investors must keep in mind that short-term market

fluctuations and politics should not impact a sound,
long-term investment strategy. And whether Americans
are thrilled to see Trump in office or not, the successful
rollout of his policies on taxes, Social Security, education and health care will still come down to compromise
within each house of Congress, across both the House
and the Senate, and between Congress and the White
A strong financial plan starts with knowing where an
investor stands today, formulating goals, and taking
stock of whether current spending and investing strategies will amount to a secure retirement. For free tools
that will help anyone track their personal finances or
for a free consultation with a financial advisor who can
assist in putting together a long-term financial plan,
visit www.personalcapital.com.



++ http://image.email.personalcapital.com/lib/fe92127274650d7c7c/m/1/Market+Outlook-4-Q3-NC.pdf
++ https://www.donaldjtrump.com/positions
++ https://blog.personalcapital.com/retirement-planning/the-future-of-social-security/
++ https://blog.personalcapital.com/whitepapers/estimating-health-care-costs-in-retirement/
++ https://blog.personalcapital.com/financial-planning-2/10-overlooked-tax-deductions-will-save-money/
++ http://www.pewresearch.org/daily-number/baby-boomers-retire/
++ https://www.ssa.gov/oact/tr/2015/tr2015.pdf
++ http://www.pewresearch.org/fact-tank/2015/08/18/5-facts-about-social-security/

Disclaimer: This communication and all data are for informational purposes only and do not constitute a recommendation to buy or sell securities. You should not rely
on this information as the primary basis of your investment, financial, or tax planning decisions. You should consult your legal or tax professional regarding your specific
situation. Third party data is obtained from sources believed to be reliable. However, Personal Capital cannot guarantee that data's currency, accuracy, timeliness, completeness or fitness for any particular purpose. Certain sections of this commentary may contain forward-looking statements that are based on our reasonable expectations, estimate, projections and assumptions. Forward-looking statements are not guarantees of future performance and involve certain risks and uncertainties, which
are difficult to predict. Past performance is not a guarantee of future return, nor is it necessarily indicative of future performance. Keep in mind investing involves risk. The
value of your investment will fluctuate over time and you may gain or lose money.





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