There are two things in life that are guaranteed: death and…. taxes. We all pay taxes, and we all dread the realization of how much we pay in taxes. However, historically speaking, we are in the 4th lowest tax rate since 1913. Therefore, if we look at the history of tax rates, workforce vs retired, and the national debt, do you think it’s feasible to say that tax rates are going to increase in the future?

We think so! Take social security for example. When social security first arrived in the United States in 1935, there were 42 people contributing to social security for every 1 person drawing from it. Today, it is 3 contributors to every 1 person drawing. In the next 10 years, it is likely to be 2 to 1.

When social security was first implemented, retirees couldn’t draw from it until age 65, and the average life expectancy was 62. Due to our advancements in healthcare, the average life expectancy today is 85. Social security is funded by…. none other than our tax dollars. Therefore, if we have approximately 10,000 baby boomers retiring per day and a large percentage of them will live for more than 10 years, how is social security going to pay for this large influx of retirees?

You got it… higher taxes! This is only one of the many programs funded by our taxes.

So, what are you doing today to minimize your taxes, today and in the future?

Contributing to a 401K? That’s a great way to reduce your taxes now, but if they are going up, wouldn’t that mean you will pay a higher income tax rate once you start taking distributions?

Contributing to a Roth IRA? That’s also a great tax-efficient account to contribute to. But, what if you want to contribute more than the allotted amount ($5,500 under 50; $6,500 over 50)? Also, what if you earn more than the maximum income limit ($117,000 single, $184,000 married)?

Contributing to and overfunding a permanent life insurance plan? This seems like the best way to avoid paying taxes in the future. But, wait, life insurance is used for death benefit. How can we use it for tax-free retirement distributions? There are certain life insurance products that allow for a person to have a death benefit for their beneficiaries, contains living benefits, and allows overfunding to build cash value for tax-free distributions in retirement.

How are you preparing for higher taxes?

Are you ready to be more tax-efficient? Call Journey today to find out how!!