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What are your biggest concerns about retiring today?
Most people would say inflation, stock market volatility, or a recession.
These are all serious challenges. Nobody can argue that. But there's a growing number of tax experts and economists who have an even bigger concern for the next wave of retirees.
And that concern is higher taxes.
What's worse than a recession? A recession with tax hikes.
–Politico
In just a few short years, the government has spent trillions of dollars on economic stimulus, new infrastructure updates, and social policy bills. And now our national debt is at a record high of more than $31 trillion.
It's kind of a no-brainer. But if you're $31 trillion in the hole, it's probably time to put down the shovel and stop digging. Yet the government wants to keep spending money.
For example, if the Build Back Better Act had passed, it would have added another $2.1 trillion to the national debt. And the student loan forgiveness plan would have cost another $30 billion per year for 10 years!
While the government is spending money like it's going out of style, federal income tax rates are lower now than they've been in over 40 years.
Our highest federal tax rate currently tops out at 37%. But do you know what the highest tax rate was in the 1970s and early 1980s? Believe or not, the top rate was 70%.
Now, I'm not suggesting taxes will go back to 70%. But the government has a lot of room to move between 37% and 70%.
It's also important to understand the government doesn't have any money of its own. Their primary source of revenue comes from taxes. But when they don't have enough to pay down the debt, they have to increase taxes.
So, the math is pretty simple. America has a record-high national debt of $31 trillion (and growing). And federal tax rates are at 40 years lows.
Obviously, this is an unsustainable combination. Something's gotta give.
Biden can't pay for everything by just taxing the wealthy.
–Washington Post
As much as the Biden administration may want to keep its campaign promise, the government has backed itself into a corner. Raising taxes for the wealthy won't be enough.
So, the bottom line is that higher taxes could be just around the corner.
If you're still working, you'll certainly feel the pain. You'll take home a smaller paycheck, and you may have to make adjustments to your budget or your lifestyle.
But if you're recently retired or nearing retirement, the timing of these higher taxes couldn't be worse.
You could be paying even more taxes on your IRA and 401K withdrawals, social security benefits and other investment income. You could pay higher capital gains taxes. And it could even trigger higher Medicare premiums.
Ultimately, the money you were counting on to help pay for your retirement could wind up being a lot less than you thought.
Learn how you could Washington-proof your retirement savings.
You have more control over how much you pay in taxes in retirement than any other time of your life. And if you take advantage of some tax savings strategies now, you could save yourself a small fortune in retirement. Click here to schedule your no-cost strategy session with a fiduciary advisor from B.O.S.S. Retirement Solutions.
B.O.S.S. Retirement Solutions is a four-time winner of Utah's Best of State Award. Tyson Thacker and Ryan Thacker are the President and CEO of B.O.S.S. Retirement Solutions with seven offices throughout Salt Lake City.
Advisory services offered through B.O.S.S. Retirement Advisors, an SEC Registered Investment Advisory firm. Insurance products and services offered through B.O.S.S. Retirement Solutions. The information contained in this material is given for informational purposes only, and no statement contained herein shall constitute tax, legal or investment advice. The information is not intended to be used as the sole basis for financial decisions, nor should it be construed as advice designed to meet the particular needs of an individual's situation. You should seek advice on legal and tax questions from an independent attorney or tax advisor. Our firm is not affiliated with the U.S. government or any governmental agency.
