Most Americans will have a lower tax burden in retirement than during their working years.

However, that may not be the case for some retirees, especially for higher earners and big savers, which could have a significant impact on their financial plans, according to financial advisors.

“Substantial evidence” suggests retirees have lower tax rates than during their working years, according to a 2024 paper published by the Center for Retirement Research at Boston College.

There are a few general reasons for this, according to a joint 2017 research paper by the Internal Revenue Service and Investment Company Institute: People who leave the workforce no longer pay payroll taxes. Their household income often drops, generally meaning less income is taxed. And Social Security recipients only pay tax on a portion of their benefits.

The “overwhelming majority” of people will have a lower tax rate in retirement, “hands down,” said Jeffrey Levine, a certified financial planner and certified public accountant based in St. Louis and chief planning officer at Buckingham Wealth Partners.

But that’s not always the case.

Those who’ve built up a sizable nest egg, perhaps with disciplined saving in a 401(k) plan or individual retirement accounts, may have large required minimum distributions, Levine said.

For example, the IRS requires that older investors take minimum withdrawals annually from “traditional” (i.e., pre-tax) retirement accounts when they reach a certain age. (It’s age 73 for those who turned 72 after Dec. 31, 2022.)

The total amount is based on an IRS formula. A bigger nest egg generally corresponds to a larger RMD.

This matters because RMDs from pre-tax accounts add to a household’s taxable income, thereby raising its total tax bill. By contrast, distributions from Roth accounts aren’t taxable, with some exceptions.

Investors held $11.4 trillion in traditional IRAs in 2023, about eight times more than the $1.4 trillion in Roth IRAs, according to the Investment Company Institute.

Additionally, investors who inherited a retirement account, perhaps from a parent, may have to empty the account within 10 years of the owner’s death, Levine said. Such withdrawals from a pre-tax account would further add to taxable income.  

In such cases, their taxable income may exceed that of their working years, said Jenkin, a member of the CNBC Financial Advisor Council.

“Most clients we sit down with today don’t want to see a diminished amount of income when they retire,” Jenkin said. “They still want to take the same level of trips, level of going out to concerts and dining, taking care of grandchildren, and many are still carrying a mortgage into retirement.”

In the first three to five years of retirement, Jenkin actually finds clients generally spend more than they do during their working years due to what he calls “a period of jubilation.”

“A lot of people just don’t want to shrink their lifestyle,” he said.

Congress may change the tax code, for example. To that point, there’s tax fight looming next year that could impact things like the size of the standard deduction and marginal income-tax rates.

That said, even if Congress were to increase the marginal income-tax brackets in the future, most retirees would likely still see their “personal tax rates” fall versus their working years, Levine said.

The Federal Reserve announced it will lower its benchmark rate by a quarter point, or 25 basis points, days after President-elect Donald Trump won the 2024 election.

Economic uncertainty was a prevailing mood heading into Election Day after a prolonged period of high inflation left many Americans struggling to afford the cost of living.

But recent economic data indicates that inflation is falling back toward the Fed’s 2% target, which paved the way for the central bank to trim rates this fall. Thursday’s cut is the second, following a half point reduction on Sept. 18.

The federal funds rate sets overnight borrowing costs for banks but also influences consumer borrowing costs.

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Since the central bank last met, the personal consumption expenditures price index — the Fed’s preferred inflation gauge — showed a rise of just 2.1% year over year. 

Even though the central bank operates independently of the White House, Trump has been lobbying for the Fed to bring rates down.

For consumers struggling under the weight of high borrowing costs after a string of 11 rate increases between March 2022 and July 2023, this move comes as good news — although it may still be a while before lower rates noticeably impact household budgets.

“The Fed raised rates from the equivalent of the ground floor to the 53^rd floor of a skyscraper, now they are on the 47^th floor and another rate cut will take us to the 45^th floor — the view is not a whole lot different,” said Greg McBride, chief financial analyst at Bankrate.com.

From credit cards and mortgage rates to auto loans and savings accounts, here’s a look at how a Fed rate cut could begin to impact your finances in the months ahead.

Since most credit cards have a variable rate, there’s a direct connection to the Fed’s benchmark. Because of the central bank’s rate hike cycle, the average credit card rate rose from 16.34% in March 2022 to more than 20% today — near an all-time high.

Annual percentage rates have already started to come down with the Fed’s first rate cut, but not by much.

“Still, these are sky-high rates,” said Matt Schulz, LendingTree’s credit analyst. “While they’ll almost certainly continue to fall in coming months, no one should expect dramatically reduced credit card bills anytime soon.”

Rather than wait for small APR adjustments in the months ahead, the best move for those with credit card debt is to shop around for a better rate, ask your issuer for a lower rate on your current card or snag to a 0% balance transfer offer, he said.

“Another rate cut doesn’t change the fact that the best thing people can do to lower interest rates is to take matters into their own hands.”

On the campaign trail, Trump proposed capping credit card interest rates at 10%, but that type of measure would also have to get through Congress and survive challenges from the banking industry.

Even though auto loans are fixed, higher vehicle prices and high borrowing costs have become “increasingly difficult to manage,” according to Jessica Caldwell, Edmunds’ head of insights.

“Amid this economic strain, it’s clear that President Trump’s promises of financial relief resonated with voters across the country,” she said.

The average rate on a five-year new car loan is now around 7%, up from 4% when the Fed started raising rates, according to Edmunds. However, rate cuts from the Fed will take some of the edge off the rising cost of financing a car — likely bringing rates below 7% — helped in part by competition between lenders and more incentives in the market.

“As Americans seek a reprieve from the relentless pressures on their wallets, even a modest federal rate cut would be seen as a positive step in the right direction,” Caldwell said.

Trump has supported making the interest paid on car loans fully tax deductible, which would also have to go through Congress.

Trump has said he’ll bring down mortgage rates — even though 15- and 30-year mortgage rates are fixed, and tied to Treasury yields and the economy. Trump’s victory even spurred a rise in in the U.S. 10-year Treasury yield, sending mortgage rates higher.

Cuts in the Fed’s target interest rate could, however, provide some downward pressure.

“Continued rate cuts could begin to drive down mortgage rates which have remained stubbornly high,” said Michele Raneri, vice president of U.S. research and consulting at TransUnion. As of the week ending Nov. 1, the average rate for a 30-year, fixed-rate mortgage is 6.81%, according to the Mortgage Bankers Association.

Mortgage rates are unlikely to fall significantly, given the current climate, explained Jacob Channel, senior economist at LendingTree.

“As long as investors remain worried about what the future may bring, Treasury yields, and, by extension, mortgage rates are going to have a tough time falling and staying down,” Channel said.

Student loan borrowers will get less relief from rate cuts. Federal student loan rates are fixed, so most borrowers won’t be immediately affected. (Efforts to forgive student debt are now likely off the table.)

However, if you have a private loan, those loans may be fixed or have a variable rate tied to the Treasury bill or other rates. As the Fed cuts interest rates, the rates on those private student loans will come down over a one- or three-month period, depending on the benchmark, according to higher education expert Mark Kantrowitz.

Still, a quarter-point cut will only cut monthly payments on variable-rate loans by “about $1 to $1.25 a month for each $10,000 in debt,” Kantrowitz calculated.

Eventually, borrowers with existing variable-rate private student loans may be able to refinance into a less expensive fixed-rate loan, he said. But refinancing a federal loan into a private student loan will forgo the safety nets that come with federal loans, such as deferments, forbearances, income-driven repayment and loan forgiveness and discharge options.

Additionally, extending the term of the loan means you ultimately will pay more interest on the balance.

As a result of Fed rate hikes, top-yielding online savings account rates have made significant moves and are still paying more than 5% — the most savers have been able to earn in nearly two decades — up from around 1% in 2022, according to Bankrate.

“Yes, interest earnings on savings accounts, money markets, and certificates of deposit will come down, but the most competitive yields still handily outpace inflation,” McBride said.

One-year CDs are now averaging 1.76% but top-yielding CD rates pay more than 4.5%, according to Bankrate, nearly as good as a high-yield savings account.

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Some consumers have been weighed down by a “vibecession” for a while now — and those feelings might get worse, experts say.

A “vibecession” is the disconnect between consumer sentiment and economic data, said Kyla Scanlon, who coined the term in 2022. Scanlon is the author of “In This Economy? How Money and Markets Really Work.”

“It’s this idea that economic data is telling us one story and consumer sentiment is telling us another,” she tells CNBC.

Nearly half, 45%, of voters say they are financially worse off now than they were four years ago, and the highest rate since 2008, according to NBC Exit Poll data.

Yet economic metrics show the economy is booming. Inflation, while it’s still a burden for consumers, has slowed down significantly. While some warning signs have popped up in the job market, to some degree conditions are normalizing from the red-hot market of a few years ago.

“The economy is so extraordinarily personal, and people really hate inflation,” said Scanlon. “That’s what we saw in this presidential election.”

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Even if the economy stays on track, Americans will likely continue to feel a “vibecession,” experts say.

The vibes might actually get worse, depending on what policies President-elect Donald Trump enacts, said Jacob Channel, senior economist at LendingTree. High-rate tariffs on imported goods will likely wipe out progress made to reduce inflation.

“If Donald Trump as president enacts the economic policies that he proposed as a candidate, we’re not only going to have a vibecession, we’re going to have a real recession,” Channel said.

Inflation, or the rate at which prices for goods and service increase over time, has come down — which means prices are still rising, but at a slower pace. Prices overall remain high, said Brett House, economics professor at Columbia Business School.

“Americans’ lingering frustration with the economy and their personal circumstances appears rooted in the persistently high prices that remain post-pandemic,” he said. “This makes for daily sticker shocks when buying groceries, getting a burger, paying rent and filling up the car.”

The consumer price index, a gauge measuring the costs of goods and services in the U.S., grew to a seasonally adjusted 0.2% in September, putting the annual inflation rate at 2.4%, according to the Bureau of Labor Statistics.

While the Federal Reserve is still concerned about inflation, “we’re seeing these signs of weakness in the labor market,” Scanlon said.

The quits rate was 3.1 million in September, a 1.9% decrease from a month before, the Bureau of Labor Statistics reported. There’s also a slowdown in hiring. The economy only added 12,000 jobs in October, the BLS reported. That’s less than the forecast of 100,000 increase and lower than the 223,000 jobs added in September.

To be sure, “a lot of this is just simply normalization after the distortions that occurred after the COVID shutdowns,” said Mark Hamrick, senior economic analyst.

Additionally, the unemployment rate continues to hold steady at 4.1% and wage growth is up 4% from a year prior. “This suggests that the labor market remains firm despite signs of weakening,” J.P. Morgan noted.

The stock market rallied after the presidential election results. Just before close on Wednesday, the Dow Jones Industrial Average had surged more than 1,500 points to a record high. The S&P 500 also popped more than 2%, while the tech-heavy Nasdaq Composite jumped 2.9% — both to record highs.

U.S. bond yields also rose. The 10-year Treasury yield jumped 15 basis points on Wednesday closing to trade at 4.43%, hitting its highest level since July, as investors bet a Trump presidency would increase economic growth, along with fiscal spending.

The yield on the 2-year Treasury was up by 0.073 basis points to 4.276%, reaching its highest level since July 31.

That could be a warning sign, Scanlon said: “I don’t think the inflation story is over yet. That’s what the bond market is telling us.”

Depending on what policies are enacted under Trump’s second term, the inflation problem might get worse, experts say.

“When we see treasury yields rising [and] the possibility of another $7 [trillion] to $10 trillion added to federal debt, those are not anti-inflationary moves, nor are mass deportations,” Hamrick said.

Trump has proposed a 10% to 20% tariff on all imports across the board, as well as a rate between 60% and 100% for goods from China. Such moves “will be inflationary,” Scanlon said. On top of that, his fiscal plan could potentially add $7.75 trillion in spending through fiscal year 2035, according to the Committee for a Responsible Federal Budget.

“Who knows what will actually get passed from this fiscal plan, but massive tax cuts and tariffs … it’s expensive, and the bond market’s telling us that,” she said.

According to the National Bureau of Economic Research, a recession is “a significant decline in economic activity that is spread across the economy and lasts more than a few months.” The last time this occurred was in the onset of the pandemic in 2020.

However, it doesn’t necessarily take for these conditions to take place for consumers to feel negative about the economy. It can be “very difficult to square” what people are feeling in their everyday lives versus national averages and medians, experts say.

“There’s still going to be that continued disconnect between how people feel and what the economy is doing,” Scanlon said.

To that point, “the vibecession will endure,” Channel said.

And if consumers end up having to deal with extra costs associated with tariffs every time they go to the grocery store, “the vibes might actually start to get a whole heck of a lot worse,” Channel added.