CINCINNATI, Oct. 10, 2016 /PRNewswire/ -- It's election
season, and that means the campaigns and the rhetoric are heating
up. But what does the election mean for investors, savers, business
owners and retirees? That's the question Fifth Third Bank (NASDAQ:
FITB) posed to investment industry experts during a recent
roundtable discussion of the differences between a Hillary Clinton and Donald Trump Presidency. In
a five-part series released today, the Bank and veteran financial
reporter Nicole Lapin explore the
major issues on the line this November– and what each could means
for investors in the short- and long-term – it a five-part video
series released today.
The series includes analysis of what the 2016 presidential
election means for retirement planning. Joe
Gagnon, an economist at the Peterson Institute, is joined by
Fifth Third Private Bank's Melissa
Register, senior wealth planner, and Jeff Korzenik, Chief Investment Strategist, in
assessing how each candidate stacks up.
Social Security
"The long-term solvency of Social
Security, the one source of retirement income most Americans count
on, has been called into question," explains Register. "As a
result, that previously ironclad source of retirement income has
begun to feature itself more prominently into political
conversations."
Register says that for her Generation X clients, she runs a
simulation that omits Social Security as one of its
assumptions.
"It's doubtful this election will significantly reduce or even
discontinue Social Security, but it's amazing how quickly and
dramatically the retirement picture changes when Social Security is
no longer in the mix," she said.
Roth IRA Concerns Linger
It's not just Social Security
that's on the table in this election. A post-election
reconfiguration in Washington
could lead to new rules for Roth IRAs, says Michael Donovan, a Fifth Third wealth management
advisor in the greater Chicago
area.
Currently, people holding traditional IRAs and 401(k)s have the
option to convert their savings into a Roth. But Congress has the
ability to revise some of the provisions that make the plans so
appealing, such as introducing a Required Minimum Distribution
(RMD), eliminating the stretch Roth IRA for young beneficiaries,
capping IRA account balances, and eliminating the so-called
"backdoor Roth IRA."
In addition, Donovan says many of his clients fear that the
tax-free growth in a Roth account will eventually be taxed if the
government comes to need the revenue. "Many of my clients don't
want to convert into a Roth for that reason," he observes.
Outside of Roth IRAs, other retirement plans, such as 401(k)s
and IRAs, will likely remain untouched, regardless of who wins in
November, Register says. "The only changes we expect are continued
inflation adjustments to maximum contributions. It's now
$18,000 for 401(k) plans, but that
will increase over time."
The Role of the Economy in Retirement Planning
For
business owners, the estate tax looms large in retirement planning.
Their companies—often an illiquid asset—are the "800-pound gorillas
of their portfolios," Donovan notes. As such, the prospect of a
forced sale of their company to meet the estate tax has long been a
concern that affects how those business owners approach
retirement.
Steady increases to the estate tax exemption, now at
$5.45 million per individual (or
$10.9 million per couple), has
alleviated some succession planning concerns of small-business
owners. Democratic candidate Hillary
Clinton has said she'd lower the estate tax exemption to
$3.5 million per individual, while
Republican candidate Donald Trump
has stated he'd like to abolish the estate tax altogether. But it's
not likely to be a top priority for either one after they're in
office, says Register. "There are much bigger tax and economic
issues to address before the estate tax should be up for discussion
again."
"Most small-business owners who are on the cusp of retirement
and trying to find the most advantageous time to make their exit
are closely watching the election as a harbinger of the economy and
the capital markets," says Glen
Johnson, who has many business owners as clients in his role
as managing director at Mirador Family Wealth Advisors. "The
political composition of the White House and Capitol Hill can
impact the business climate, which plays a significant role in
their ability to get the best price and the best terms on the sale
of their company."
"If there's a wholesale shift from a split government with the
Republicans in charge of Congress, to, a Democratic sweep, then a
more-profound change in economic policy could result that would
raise the level of uncertainty among investors," says Korzenik.
Nonetheless, he remains confident that after the election the
stock market should continue to provide a positive return, even if
it is less than 10 percent, in 2017. And given that most people
have a sizable portion of their retirement savings tied up in the
markets, that would be good news for both retirees and would-be
retirees alike.
For more on the potential impacts of Election 2016, Fifth Third
Private Bank has compiled a helpful guide at
http://investing.53.com/FifthThirdPrivateBankElectionOutlook2016.
The five-part video and article series explores the major issues on
the line this November, and how the election may affect retirement,
the economy, investment strategies, taxes, and creating or
preserving wealth for the next generation for years to come.
About Fifth Third
Fifth Third Bancorp is a diversified financial services company
headquartered in Cincinnati, Ohio.
The Company has $144 billion in
assets and operates 1,191 full-service Banking Centers, including
94 Bank Mart® locations, most open seven days a week, inside
select grocery stores and 2,541 ATMs in Ohio, Kentucky, Indiana, Michigan, Illinois, Florida, Tennessee, West
Virginia, Pennsylvania,
Georgia and North Carolina. Fifth Third operates four main
businesses: Commercial Banking, Branch Banking, Consumer Lending,
and Wealth and Asset Management. Fifth Third also has an 18.3%
interest in Vantiv Holding, LLC. Fifth Third is among the largest
money managers in the Midwest and, as of June 30, 2016, had $305
billion in assets under care, of which it managed
$26 billion for individuals,
corporations and not-for-profit organizations. Investor
information and press releases can be
viewed at www.53.com/. Fifth Third's common
stock is traded on the Nasdaq® Global Select Market under the
symbol "FITB." Fifth Third Bank was established in 1858. Member
FDIC, Equal Housing Lender.
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SOURCE Fifth Third Bank