Stimulus Money Will Cost Some Future Retirees

Stimulus Money Will Cost Some Future Retirees

A trillion here, a trillion there, the trillion-dollar figure gets thrown around a lot these days as stimulus money begins to make its way to individuals and small businesses.  This looks like the first of what will be multiple packages to try and save the US economy.  In the near term it is necessary but in the long term it is very, very expensive. 

That might be true but what does that have to do with retirement?  Someone must pay and that means the American taxpayer.  Excessive government debt matters at some time and that time could come during your retirement and in the wrong tax classification you could be faced with significantly higher taxes which ultimately reduces expected standard of living or increases the possibility one will outlive their money.   As interest rates will be rising in the coming years, the amount it costs to service the national debt will also increase.  Higher the interest rates, the more it costs to service the debt. 

So how will the government make up for those future shortages?  One way will be the tax system.  Whether that means raising taxes, changing tax brackets, eliminating tax deductions or a combination of all it will basically boil down to a shakedown of the American taxpayer.  A significantly higher future tax rate is not something most people think about.  On the contrary, most expect their tax rate to be lower in retirement because they expect to be making less income. 

If one does expect higher taxes in the coming years, avoiding as much future tax liability is an important part of the retirement planning puzzle.  Going forward, it looks like deferred-tax liability vehicles are looking less and less attractive. Tax free and or tax-exempt access gives you more control over the unknown future environment instead of dealing with that variable of deferring taxes years down the road and wondering how much will  really be owed.  Remember retirement is not an age but a situation.  Create the future you want and remove as many variables as you can to put you in control.

Written by Mike Amos

Founder and active contributor of millionairemindset.life