The Power Of Zero Show Now is the Best Time in History to Get to the 0% Tax Bracket
If you have the lion’s share of your wealth in a tax-deferred bucket, you have actually played your cards perfectly. You probably allocated that money at a time when tax rates were likely higher, and right now tax rates are at historic lows. This is the perfect time to move things into the tax-free bucket.
The question is ‘How long will these historically low tax rates last?’ Traditional thinking says tax rates will revert to higher rates in 2026, but that seems pretty unlikely to happen.
No politician wants to be the one that raises taxes on the largest voting block in America. The most likely scenario is that Congress will extend the Trump tax cuts at some point between now and 2026 for another eight years.
This may be the most important eight-year window in your life, given where tax rates will have to go into 2030 and beyond.
Citing out-of-control spending on Social Security, MediCare, MediCaid, and interest on the debt, former Comptroller General David Walker has predicted that tax rates will have to double in or before the year 2030.
Slowly shift your tax-deferred bucket into the tax-free bucket now while there is still time.
The 24% tax bracket is the greatest sweet spot of all sweet spots. It’s only 2% more than you’re likely paying right now and it allows you to shift an additional $170,000 a year to tax-free.
The 24% tax bracket is better than the future version of the 22% tax bracket, which is 25%.
Every year that goes by where you fail to take advantage of the 22% and 24% tax brackets is potentially a year beyond 2030 where you could be forced to pay the highest tax rates you’re likely to see in your lifetime.
Take advantage of the next 8 years to preemptively pay taxes on your retirement assets so that by the time tax rates potentially double, you’ve done all the heavy lifting and can withdraw those assets tax-free.
Mentioned in this episode:
David's books: Power of Zero, Look Before You LIRP, The Volatility Shield, Tax-Free Income for Life and The Infinity Code
PowerOfZero.com (free video series)
@mcknightandco on Twitter
@davidcmcknight on Instagram
David McKnight on YouTube
Get David's Tax-free Tool Kit at taxfreetoolkit.com