With this week marking the start of a new political era, many individuals have questions about what may be coming for their financial wellness.
Luckily, President Biden has already outlined many of his economic plans, reaching across areas such as debt management, retirement savings, health insurance and more. Here are just a few ways your wallet may be affected now that Biden/Harris are in office:
Taxes: President Biden’s tax plan was a well discussed topic on the campaign trail, but what does it actually mean for you? Well, it would have the biggest impact on a few core groups should it come to pass:
- Anyone making over $400,000 would see their federal taxes increased
- Anyone who is inheriting would now be subject to taxation, due to the elimination of the stepped-up basis rule
- Corporations, which would also face a tax rate jump
President Biden has also mentioned repealing the Tax Cuts and Jobs Act of 2017, which made changes to the tax rates and tax base of individual income tax. So, all in all, while the highest-income Americans are most likely to see tax bumps, they’re not the only ones who may owe more of their paychecks over time.
Student Loans: Whether you already have student debt, or you or a family member are about to begin school, a Biden/Harris administration may impact your payment plan. First, they’ve proposed making public colleges free for all families making less than $125,000, as well as offering some community colleges and other 2-year training programs for free to certain groups. President Biden has also proposed doubling the maximum value of Pell Grants, which are provided to low and middle-income students. Next, President Biden has created a plan to make existing loans easier to manage. Specifically, “individuals making $25,000 or less per year will not owe any payments on their undergraduate federal student loans and also won’t accrue any interest on those loans. Everyone else will pay 5% of their discretionary income (income minus taxes and essential spending like housing and food) over $25,000 toward their loans. After 20 years, the remainder of the loans for people who have responsibly made payments through the program will be 100% forgiven.”[1]
Health Care: Another major topic on President Biden’s campaign trail was his view on healthcare. He has vowed to protect the Affordable Care Act, as well as to expand it by creating an affordable public insurance option similar to Medicare. While Americans would still have the option to use private insurance, this new option would greatly reduce healthcare costs for many. However, President Biden also wants to reintroduce the individual mandate, which could mean a penalty for lack of coverage.
COVID Relief: One of the first plans President Biden has said he’d like to implement is the passage of another Coronavirus relief bill, this time with $2,000 stimulus checks. The plan will also expand unemployment benefits and send relief to state and local governments that can further assist citizens on a more local basis. As with previous COVID relief packages, however, it is likely that the benefits will change greatly as the proposal moves through Congress.
Retirement: President Biden has also outlined some plans to help working individuals create a sound retirement fund. First, he’s proposed creating access to an automatic 401(k) plan to enable all workers to easily save. Next, he has suggested a refundable tax credit that would be issued in the form of a matching contribution. In other words, rather than a 401(k) reducing taxable income, an individual would see 26% of their contribution matched by the government in the form of a direct deposit into their 401(k) plan. This, President Biden says, is supposed to “equalize benefits across the income scale, so that low- and middle-income workers will also get a tax break when they put money away for retirement.”
Of course, it is important to keep in mind that all these plans are simply proposals at this point, and there is no telling to what extent they will be implemented, or when. So rather than counting on increased OR decreased expenses, Americans should begin creating a financial plan for either scenario, and building the resources they need to handle whatever may come our way these next 4 years.
No matter what happens, a Kashable low-cost loan can help you plug the gap or achieve your financial goals with ease. Learn more and Check Your Rate now.