Essential strategies to protect your retirement amid increasing uncertainty

As the old saying goes: Plan for the worst and hope for the best.

If ever you need an incentive to plan for the worst, consider reading about the ways in which the Trump administration’s policies may be worsening Americans’ retirement prospects and increasing uncertainty in the latest paper – “Projecting New Policy Proposals’ Effects on Americans’ Retirement Prospects” – written by Lauren Valastro, an assistant professor of law at Texas Tech University’s School of Law.

Among other things, Valastro wrote that some policies – including eliminating federal income taxes on Social Security benefits and the large-scale deportation of workers who currently pay into Social Security – would accelerate the crisis Social Security faces if enacted.

At present, the Old-Age and Survivors Insurance trust fund, which funds Social Security retirement and survivor benefits, is projected to become depleted in 2033, with 77% of benefits payable at that time, according to this year’s trustees report.

President Trump proposed eliminating federal income taxes on Social Security benefits as part of his One Big Beautiful Bill Act, which was signed into law in July. The effort failed for several reasons, including constraints imposed by Senate budget-reconciliation rules. Additionally, the income taxes collected on Social Security benefits are specifically allocated to the Social Security and Medicare trust funds. Had the proposal succeeded, Valastro said, it would have accelerated the programs’ projected insolvency date to 2031.

Instead of repealing the taxation of Social Security outright, the new law did include, however, a temporary enhancement to the standard deduction for Americans age 65 and older, allowing for an additional $6,000 deduction per eligible individual from 2025 through 2028.

Read: No tax on Social Security? Not quite. What the tax megabill really means for seniors.

This expanded deduction is substantial enough to eliminate federal income-tax liability on Social Security benefits for roughly 88% of retirees, according to the White House Council of Economic Advisers. Prior to the GOP tax megabill becoming the law of the land, around 50% of Social Security beneficiaries paid federal income tax on a portion of their benefits, based on data from the Social Security Administration and other government sources.

However, experts caution that, when combined with the extension of current tax rates and brackets, these changes could accelerate the projected insolvency date for the Social Security program to 2032.

Read: Social Security Old-Age and Survivors trust fund could run out of money sooner than expected, senator warns

Read: Trump promised ‘no tax on Social Security’ in his One Big Beautiful Bill Act. This Democratic bill could actually do it.

What’s more, while Trump has promised no cuts to benefits, the Republican Study Committee wants to raise the full retirement age from 67 to 69, which would cut benefits by 12.5% to 14.3%, according to Valastro.

‘Over the course of a person’s career, a 2% fee can erode roughly half of their retirement savings.’Lauren Valastro, professor at Texas Tech University’s School of Law

Safeguarding retirement accounts

In 2024, the Biden administration finalized a new fiduciary rule – the Retirement Security Rule – that would have required advisers to act as fiduciaries, including when recommending 401(k) rollovers. Implementation of the rule is now delayed and uncertain following legal challenges and executive action.

Earlier this year, Trump eliminated the so-called fiduciary rule that required investment advisers to act in clients’ best interests when managing retirement funds.

Eliminating the Biden administration’s fiduciary rule will result in an estimated $18.5 billion in hidden fees and lost earnings over 30 years, Valastro wrote.

The affected accounts? Individual retirement accounts (IRAs) holding $14.5 trillion would lose fiduciary protections, meaning advisers will legally be permitted to give self-interested and conflicted advice.

In addition, the Trump administration is promoting crypto investment in 401(k)s without addressing the “significant lack of clarity” in fiduciary law for self-directed brokerage windows, according to Valastro. And no court has clearly defined fiduciary duties for these investment vehicles, which creates a “legal vacuum” where workers’ retirement savings lack protection, she said.

The Trump administration’s hostility toward environmental, social and governance (ESG) investing also forces these investments into less regulated brokerage windows, Valastro wrote. Workers pay higher fees for brokerage-window investments compared with plan-menu options. From her point of view, this stance creates needlessly paternalistic restrictions on how individuals can invest their own money.

Read: Here’s how to ditch your restrictive 401(k) plan and pick your own investments

All this uncertainty about fiduciary duties will likely, according to Valastro, trigger lawsuits when crypto or ESG investments lose value. And the legal costs will get passed to plan participants through higher administrative fees.

Plan sponsors face unclear rules, leading to expensive overcompliance or risky undercompliance, she wrote.

In effect, Valastro wrote that Trump’s policies will weaken all three supports of retirement’s three-legged stool:

— Social Security: Hastened insolvency

— Individual savings: Reduced fiduciary protections enable predatory advising

— Employer-sponsored plans: Regulatory uncertainty around crypto and ESG investments

Retirement security at risk

Echoing Valastro’s concerns about the future of retirement security, Olivia Mitchell, the director of the Boettner Center on Pensions and Retirement Research at the Wharton School of the University of Pennsylvania, emphasized that the pending insolvency of Social Security in 2033 as well as Medicare in 2036 is an “enormous political challenge that we face.”

Moreover, Mitchell said many recent tax changes are hastening the system’s insolvency date. “I would also note that the large and rapidly growing deficit our nation is facing will further threaten retirement security, potentially requiring much higher taxes on retirees as well as workers, loss of purchasing power due to higher inflation, investment risk for retirees’ bond-heavy portfolios, and weaker economic growth due to uncertainty, market volatility and reduced public trust,” she said.

Unfortunately, Mitchell doesn’t see any easy resolution “to the grim future” we face as retirees and as Americans. “We should have adopted the reforms 20 years ago proposed by President George W. Bush’s bipartisan Commission to Strengthen Social Security, on which I served,” said Mitchell.

And why all this matters, according to Valastro, is that Americans already face a retirement-savings shortfall of nearly $500,000 on average; 25% of Americans have no retirement savings at all; and each policy failure makes the others worse, creating a downward spiral.

Get off autopilot and start thinking about retirement

What can workers do given the potential adverse effects of the Trump administration’s retirement policies?

“I think the first thing people can and should do is simple: start thinking about their retirements,” Valastro said. “The literature shows that busy Americans do not spend much time thinking about or planning for retirement, and those who are fortunate enough to have employer-sponsored defined-contribution plans like 401(k)s tend to allow them to remain on autopilot after making their initial investment selections.”

Everyone needs to get off autopilot and spend some time looking at their portfolios and making appropriate adjustments to them, according to Valastro.

“Acknowledging that most of us are not investment professionals, I would encourage people to look at two things: investment allocations and fees,” she said. “The present administrative rollback of protections for workers saving for retirement, and the present economic instability and impending Social Security crisis, underpin this advice.”

Fees can devour retirement savings by shocking amounts, noted Valastro.

“Over the course of a person’s career, a 2% fee can erode roughly half of their retirement savings,” she said. “But most of us have no idea how much we’re paying in fees. I’m not suggesting that ascertaining fees is always the easiest thing to do, but even if it’s difficult to precisely pinpoint how much fees are associated with a specific investment, in all likelihood, people who are saving for retirement or who are retired can determine comparatively which investment options available to them on their plan menus are more cost effective.”

Upon doing so, she noted the best strategy for most people is going to be moving away from high-cost investments to passive, low-cost index fund investments.

“For example, recent news stories have suggested that target-date funds that many people invest in through their 401(k)s are rife with high fees that make them suboptimal investments,” she said. “Anyone investing in a TDF should take a look at whether that is the case for them and act if necessary.”

In that same vein, “given the administration’s rollbacks on protections associated with financial advisers, which inevitably will result in self-interested advice being given by some advisers, I would encourage people to become more familiar with their investment allocations,” Valastro said.

Read More: Morningstar