One of the Biggest Risk and Opportunity in Retirement | Tax Opportunities in Retirement

Today’s episode is about the biggest risk and opportunity in retirement, which has to do with Taxes!
As taxes are expected to go up in the future, Atty. Chris gives his advice on what you can do to minimize taxes. Especially with the Secure Act and Tax Cuts and Jobs Acts.


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Episode Transcript


Biggest Opportunities for Retirement and Legacy Plan

It’s Chris Berry with Castle Wealth Group and today we’re going to talk about one of the biggest risks, I think, in the future, and one of the biggest opportunities in terms of your retirement and legacy plan, and it has to do with taxes. And if you like this information, please make sure to subscribe. We’re going to release these daily. My goal is to do 366 Daily Wisdom videos throughout the year. Not all recorded on the same day, hence you might see me wearing the same shirt, but we’re going to release them every day. So make sure to subscribe so you get your daily dose of retirement and legacy planning wisdom.

Christopher Berry is a leading estate attorney and advisor in the area of retirement and legacy planning. He has been featured in publications such as Forbes, Kiplinger’s, Crain’s Detroit, and more. He’s the host of the weekly radio show and podcast The Chris Berry Show. He’s a national thought leader as it relates to retirement and legacy planning and has authored the Amazon best selling book The Caregiver’s Legal Guide.

One of the biggest issues I see moving forward and biggest risks is with regards to taxes. So we’re in this unique world right now where we’re coming out of the pandemic, the government spent a lot of money trying to bail out businesses and individuals, and they have some more money to foreign countries as part of the different bills. But now we’re about $30 trillion in debt. In fact, you can go to the, I think, to see just how much debt we’re piling up as a country. And you couple that with the fact that we’re $30 trillion in debt, we had the Secure Act that passed in late 2019 and became effective January 1st, 2020 that says when you leave free tax accounts to the next generation, they’re going to have to pay all the taxes within 10 years instead of being able to stretch it out over their lifetime.


Tax Cuts and Jobs Act

And then we also had the Tax Cuts and Jobs Act. It was supposed to run from 2018 to 2025, but with the change in presidency, that might be repealed. And what the Tax Cuts and Jobs Act says is that across the board taxes are going up. Your marginal tax rate is going up 3 to 4%. And one of the things that I always reference is this key numbers, because the numbers change every year and I’m holding up the 2020 numbers. We have the 2021. And one of the most important things I always point people to is marginal tax rates, understanding how marginal tax rates work. And if you reach out to us, I’d be happy to send you a copy of the key data for 2021. But marginal tax rates basically start at zero and then go to 10% and then 12% and then 22, 24, 32, et cetera.

So when the Tax Cuts and Jobs Act is repealed, understand that those numbers are going up. So if you’re at the 22% tax bracket, that’s going up to 25. If you’re at 24, that’s going up to 28. So what that means is maybe you should consider a tax plan. You’re probably familiar with tax preparation. This is just looking at what happened the last year. It’s kind of an oxymoron to call it a preparation because you’re looking in the past. What we’re talking about is tax planning. So what is your tax plan strategy over, say, the next five years, assuming that we have the Tax Cuts and Jobs Act? What is your tax planning strategy given that it looks like taxes are going to have to go up in the future even more than just by repealing the Tax Cuts and Jobs Act, given that we’re $30 trillion in debt? And do you think the country’s going to stop spending? It certainly doesn’t seem that way.

So more likely we’re going to see either flat tax raises or some of the stealth tax raises like the Secure Act, which I talked about, where it’s not necessarily raising taxes, but it’s just saying that when we leave things to the next generation, we’re going to compress the window where they have to pay the tax, which is going to in effect raise taxes. So what can you do? Well, one of the things that we typically do is we look to see where are you normally going to be in terms of your marginal tax rates and see if there’s space in between there and the next tax bracket. And we can do things like Roth conversions or pull money out of the IRA, pay the tax, and just invest it somewhere else. And there’s an art and science to it because also this could have effect on different things like Medicare premiums, et cetera, but we always want to run the numbers.


Tax Planning Strategy

Again, I think with the window of opportunity we have with the Tax Cuts and Jobs Act, coupled with the fact that we know taxes have to go up, there should be some type of tax planning strategy. And there’s different things that we can do now to minimize taxes. And we look at taxes not through a micro lens and minimizing taxes in one specific year, but let’s look at it through a macro lens, minimizing taxes over your lifetime, and then also what you leave as a legacy to the next generation. So taxes, I think that’s the biggest risk and biggest opportunity right now for pre-retirees, retirees. And even people working. Think about where you’re saving your money.

Maybe you shouldn’t be saving all of your money in that pre-tax account. Create some tax diversification. Look at things like cash value life insurance, Roth IRAs, Roth 401ks, health savings accounts, 529s, they have to be used for education. Don’t put everything in that tax deferred bucket if you think taxes are going up in the future. So this has been Chris Berry with Castle Wealth Group. Hopefully you found this informational and educational. If you could do me a favor, just hit that subscribe button. Much appreciated. Take care

Castle Wealth Group has clients across the nation and helps families plan, protect, and preserve what is important by creating a retirement and legacy blueprint.


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