Ready For Retirement What Should You Expect Taxes to Be in Retirement?
In this episode, James talks about key factors that might influence future tax policy. This is especially important for retirees and soon-to-be retirees because a change in your tax bracket could affect your income in retirement. We cannot see into the future, but we can make some predictions about how to best prepare for what taxes will look like in retirement.
James talks a bit about the history of federal income taxes to show how even compared to their origins, we are currently close to those historic lows. The average income taxes people are paying today are substantially lower than before. New tax law was signed into place in 2017, but those brackets are going to expire in 2025. For most people, there will likely be an increase of 3-4% in their tax bracket at expiration in 2025.
James lists three things that can inform what taxes will look like in the future: 1) the fact that taxes are near historic lows, 2) the national debt levels are rising, and 3) the population is getting older. The government must offset debt by either cutting spending or raising taxes. It looks like there will probably be tax hikes in the future. James then lists some specific strategies you can use to hedge against potential tax hikes, including diversifying your investments and delaying drawing from retirement accounts.
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