Terror attacks, hurricanes, forest fires, a divisive election… A lot of us are probably glad to put the events of 2016 behind us. But there were some silver linings.
The stock market ended the year at record highs. Unemployment fell to the lowest number in nine years. And consumer confidence ended the year at the highest level in 15 years.
What’s to come in 2017? The new Trump administration, which takes over this month, creates some question marks—but here’s what we might expect.
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We may owe Uncle Sam less.
If Congress approves President-elect Donald Trump’s plan to narrow the seven tax brackets to three, some of us will see cheaper tax bills—though maybe not by much. While the country’s biggest ballers ($415,050+ earners) would get a 7-percent break, a $100,000 earner would see a 3-percent cut. And those of us making $37,650-$91,150 as single filers would stay in the 25-percent bracket.
Some better news? Trump’s plan would double the standard deduction: Individuals could deduct $15,000 (up from $6,300), and married people filing jointly could deduct $30,000 (up from $12,600).
But we’ll probably pay more for everything else.
Inflation’s been low for the past couple years—as of November, the consumer price index had risen 1.7 percent over the previous 12 months. But Albert Brenner, director of asset allocation strategy at People’s United Wealth Management in Connecticut, expects it to hit 2 percent or more this year, depending on oil prices. (OPEC recently agreed to curb production, which could drive up energy costs.)
Another unknown? How Trump will handle trade regulations. “The President-elect talked about imposing tariffs on imported goods from China,” Brenner says. “Such a tariff would increase the cost of just about everything you can buy at Walmart, besides food.” (Which, by the way, is also set to be pricier in 2017.)
Medical costs will keep creeping up.
To better handle rising prices, more employers are transitioning to high-deductible health plans. In fact, 60 percent plan to offer them exclusively over the next three years, according to one survey. If your company’s among them, look into an HSA—a tax-advantaged savings account—to offset your costs.
Credit card debt will be pricier.
After raising the target for interest rates on December 14, the Fed said it’s planning three more hikes in 2017. While this is good news for bond investors and (eventually) savers, it also means mortgages, credit cards and auto loans can get more expensive.
If your debt has a variable rate (meaning it fluctuates with changes to an index), work on paying it off ASAP. Or consider converting it to fixed-rate debt, if possible, so even if rates increase over time, you’ll be locked into today’s low rates.
The market may have an eventful year.
Stocks have been on a tear since the election, with the Dow closing in on the 20,000 mark. “Wall Street is looking at the fact that a businessman in the White House will look to deregulate and lower taxes on businesses,” says Ralph Grauso, founder of ASC Financial Group in Pennsylvania. But Trump’s rep for breaking the rules could keep the market on its toes.
What’s that mean for investors? Not much, really. The best thing we can do is create—then stick with—an investing strategy that’s consistent with our goals. “Take the time to review where you are, how you got there and where you’re going,” says Certified Financial Planner Bill Van Sant, managing director at Girard Partners Ltd. in Pennsylvania. “If you’re still on the right track, stay there.”