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October 3, 2017

How Will Trump’s Tax Reforms Affect Senior Americans?

Anyone else might be sitting quietly in a corner licking their wounds after the latest defeat in the war on healthcare, but President Trump has carried on regardless with the next agenda item, which the New York Times has described as the most sweeping tax overhaul the USA has seen in decades.

On a visit to Indiana State Fairgrounds, the President told a gathering of supporters that the reforms would predominantly benefit “everyday American workers” - but while high on rhetoric, the speech was light on detail as to exactly how that would come about from a plan ostensibly aimed at reducing the tax burden on the most wealthy individuals and on large corporations.

Impact on seniors

Among the most vocal groups during the debate over healthcare was the American Association of Retired Persons (AARP) and it seems likely they will have another battle on their hands when it comes to the new tax reforms. These are difficult times for those at or approaching retirement age - the ongoing concerns over healthcare must be seen in the context of increased life expectancy and reduced overall income due to the poor performance of the major pension funds.

Little wonder America’s seniors and the AARP in particular will be watching the next steps carefully and asking how the Trump administration plans on funding the tax cuts. The Older Americans Act has been facing budget pressure since George W Bush was in power, and even under Obama, funding remained static despite the number of those using benefits steadily increasing.

New tools for a new era

The financial landscape is already changing to develop the tools and services to help seniors cope in evolving economic times. A prime example is the phenomenon of reverse mortgages, which are proving to be a popular way for American seniors to leverage the equity tied up in their homes to provide a cash injection and deliver a regular monthly income throughout their retirement.

There can be little doubt that over the coming years, more American seniors will take the reverse mortgage option, and there is every likelihood that similar financial products will be developed for the new dynamic.

Right now, we can only wait and see how drastic an effect the proposed reforms will have on older Americans, and when such changes will come into effect. But one thing is for sure - older adults, need to be prepared to face a very different world.

The views and opinions expressed herein are the author's own, and do not necessarily reflect those of EconMatters.

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