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Daily Capital

Survey: Financial Planning with a New Administration

Key Points

  • 75% of people believe the 2020 election outcome would impact their finances
  •  Boomers and Gen Xers (at 78%) are most likely to believe the presidency affects their pocketbooks
  • When voting, Gen X voters were the most likely to consider a candidate’s platform about the economy and their own financial situation
  • Millennials were more likely to consider their own personal finances
  • Gen Z was by far the most likely to sell — 59% of the younger generation cashed out their investments as a result of the election

President Joe Biden has been in office for just over a month now. Amidst the global pandemic, the economy and our personal finances have been central to the conversation about the change in presidency.

It comes as no surprise that most Americans believe a change in administration will impact their finances and that people have made changes to their financial plan in response to recent events. When we look a bit more closely, we can see that different demographics have responded to the past year in different ways.

Most Americans Believe Election Outcome Impacts Their Finances

Americans seem to overwhelmingly agree that the outcome of the presidential election will impact their finances. They just aren’t sure how.

In a recent survey conducted by The Harris Poll on behalf of Empower Retirement and Personal Capital, 75% of respondents believed the outcome would impact their finances. When you look more closely at the data, it becomes clear how different generations viewed the election.

For example, Boomers and Gen X individuals were more likely to believe the election outcome would impact their finances — a full 78% of both generations. On the other hand, Millennials and Gen Z individuals were less likely to agree. Just 68% of Millennials and 65% of Gen Z thought their finances would be affected.

While most Americans felt that there would be a financial impact, they weren’t sure what it would be. Women and Millennials, in particular, felt unsure of how their finances would be affected. And surprisingly, Gen Z seemed the least unsure. Only 53% of the younger generation weren’t sure what the impact would be.

Given the prevalent financial uncertainty among Americans, it certainly doesn’t come as a surprise that most people had finances top of mind when they voted:

  • Gen X voters were the most likely to consider a candidate’s platform about the economy and their own financial situation
  • Millennials were more likely to consider their own personal finances
  • Gen Z and Boomers were more concerned with the economy as a whole

It’s worth noting that while generational divides played a big role in how likely people were to vote based on financial factors, the biggest discrepancy is actually based on whether someone has children. Parents were more likely than any other demographic to vote based on both a candidate’s economic platform and the potential impact on the voter’s personal finances. 67% had their financial situation top of mind when voting, compared to just 55% of non-parents.

Many Americans Are Making Money Moves in Response to the Election

It makes sense that people were thinking about the financial impact of the presidential election. 2020 had already been a volatile year because of the COVID-19 pandemic, and the economy was certainly at the forefront of the political debate. 

While Americans agree overwhelmingly that the election outcome will impact their finances, considerably fewer are making changes to their portfolios as a result.

Just over one-third of Americans sold investments to cash out. Gen Z was by far the most likely to sell — 59% of the younger generation cashed out their investments. The percentage decreases with each generation, with Boomers being least likely to have cashed out an investment in response to market volatility.

More than anything, this data might simply indicate experience in the market. The older generations have experienced more market downturns. And more importantly, they’ve seen evidence that the market always bounces back. But Gen Z investors have likely never been through the market volatility we saw in 2020, making them perhaps more inclined to pull their money out altogether.

There are also considerable discrepancies across gender and parental status. Men were considerably more likely than women to cash out their investments. And parents were more than twice as likely as non-parents to cash out. The demographics that were most likely to have sold investments to cash out — Gen Z, men, and parents — were also the most likely to shift their money into less risky assets.

Should You Change Your Financial Plan After an Election?

Clearly, finances are at the top of people’s minds in the aftermath of the presidential election. Most people aren’t sure just what the impact will be. While many people have made changes to their financial strategy given the past year’s events, most have stayed the course.

So what’s the right answer?

While no one can entirely predict the future, history shows us it’s okay to be optimistic. First, the stock market has bounced back from every market downturn. From the Great Depression in the 1930s to the Great Recession in the first decade of the 2000s, the market has always recovered.

What’s even more important to note is how little a change in presidency is likely to affect your finances.

“Transitions in leadership from elections can be emotionally charged for people,” said Brenden Erne, CFA and Director of Portfolio Implementation at Personal Capital. “But the reality is very little tends to change. And regardless of which party wins, returns tend to be positive in both the election year and first year in office.

“Said another way, it’s okay to care about politics, but we believe it’s best to not let presidential elections influence your investment decisions.”

Read the Full Report

Personal Capital compensates Erin Gobler for providing the content contained in this blog post.

The content contained in this blog post is intended for general informational purposes only and is not meant to constitute legal, tax, accounting or investment advice. You should consult a qualified legal or tax professional regarding your specific situation. Keep in mind that investing involves risk. The value of your investment will fluctuate over time and you may gain or lose money.

Any reference to the advisory services refers to Personal Capital Advisors Corporation, a subsidiary of Personal Capital. Personal Capital Advisors Corporation is an investment adviser registered with the Securities and Exchange Commission (SEC). Registration does not imply a certain level of skill or training nor does it imply endorsement by the SEC.

Erin Gobler is a money coach who helps people pay off debt and reach their big financial goals without giving up spending on the things they love.
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