Most people don’t realize that the Federal Income Tax was originally implemented as a temporary solution to help fund the Civil War. Eventually, the tax morphed into a requirement, mandating all United States citizens pay the Federal government an amount based on their income. Today, in addition to federal taxes, we must pay state, city, and county taxes.
Approximately 34% of American households make over $100,000 a year. Many may pay close to 50% of what they earn in taxes. While those retired have budgeted for the cost of taxes, they most likely haven’t budgeted for an increase in tax rates, which will inevitably increase on January 1, 2026. We find that a lot of clients don’t even budget taxes into their retirement cashflows when planning.
This increase is due to the sunset provision implemented in the Tax Cuts and Jobs Act of 2017. It is currently being determined whether the federal government will pass legislation to keep the income tax brackets where they are (inflation-adjusted, of course) or let them lapse and return to their original higher rates.
With the US Debt Clock continually ticking at 31+ trillion dollars, it is clear that taxes or spending must come down.
If roughly 50% as a tax rate is not worrisome enough, once you factor in inflation, the death of a spouse (causing lower brackets with similar income in most cases), long-term care needs, and capital gains from appreciated assets, to name a few – we are at risk of paying even more. As Ben Franklin once said – “nothing is certain except death and taxes.”
What if you could minimize the taxes you pay, thereby increasing your ability to preserve your hard-earned money and create wealth while planning for retirement?
Our team’s philosophy is to teach our clients great financial habits.
We use the LEAP financial model to help us verify clients’ financial decisions. This model considers protection, savings, growth, cash flow, income, expenses, and debt to give us a Present Financial Position.
By looking at the current state, our team can help clients understand how the financial decisions they are making today affect their future wealth. Armed with sane solutions, sound strategies, and simple steps, our clients are empowered and confident in their financial journey.
Our team confidently employs strategies that ensure our clients will stay supplied with money in retirement after factoring in increased taxes. Please contact us if you are interested in reviewing an existing plan or would like to speak with a team member to discuss how to mitigate your financial risks.
The opinions expressed in the Blog are for general informational purposes only and are not intended to provide specific advice or recommendations for any individual or on any specific security or investment product. It is only intended to provide education about the financial industry. Please consult your certified financial advisor.