June 14, 2021
Joe Biden’s Proposals And Its Effect On Your Retirement | Federal Spending 2021
Joe Biden’s Proposals and its effect on your Retirement | Federal Spending 2021
Joe Biden has proposed an additional $1.9 Trillion in terms of support and relief due to the pandemic.
There is also a $2.3 Trillion for the Infrastructure Bill, and another $80 Billion going to the IRS.
Prior to this whole pandemic, we are about $22 Trillion in debt as a country.
Think about how this applies to you. Do you have pre-tax accounts? Where do you think those taxes are going?
If taxes go up in the future, the value of pre-tax accounts goes down.
The other thing to think about is not only Income Taxes but also Estate Taxes. Biden has also proposed lowering the Estate Tax exemption.
Tax is one of the biggest risks and also the biggest opportunity in retirement right now. We just need to take advantage of certain tax planning strategies before the changes take place.
Maybe we pay a little more tax now to save a lot of taxes in the long run.
Think about all the federal expending that’s going on, and what effect will that have on the future of your pre-tax retirement account.
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Episode Transcript
Govermental Spending Is Affecting Your Retirement
Hey, this is Chris Berry, with Castle Wealth Group. And today, we’re going to talk about Joe Biden’s latest proposals and what effect that might have on your retirement. And if you like this information, please make sure to subscribe to our YouTube channel.
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 bestselling book, The Caregiver’s Legal Guide.
So I woke up this morning preparing to do a webinar for about 30 people tonight on taxes and retirement and navigating the retirement tax storm that we’re in the middle of. And as I’m drinking my morning coffee and reading The Wall Street Journal, I saw a couple articles that jumped out at me in the news. And the first was Joe Biden’s proposal with regards to the Coronavirus Relief Act. So he’s proposing another $1.9 billion in terms of supports and relief due to the pandemic. And I’m not trying to get political. I’m not saying that’s a good idea or a bad idea.
All I want you to think about is how will all of this governmental spending affect your retirement. And then on top of that, there was another multi-trillion, $2.3 trillion infrastructure bill. And then adding salt to the wound of federal spending, another $80 billion going to the IRS to beef up the enforcement of tax rules and regulations. So that’s a lot of federal spending to wake up to this morning, as I’m about to give a webinar on planning for retirement with regards to taxes and navigating the ticking tax time bomb that exists inside of your retirement portfolios.
Backstory
So a little bit of a backstory here. We’ve been talking about minimizing taxes, really since about 2015, 2016, when federal spending really started to get out of control. Prior to this whole pandemic, in 2020, we were about $22 trillion in debt as a country. And then we had the pandemic happen, which increased spending. We were approaching $30 trillion. And then now this morning, I see 1.9 trillion, 2.3 trillion. We can’t even wrap our minds around what that number looks like. And then this part cracks me up. $80 billion going to the IRS to beef up them chasing individuals and businesses for more taxes. So think about how this applies to you. Do you have IRAs or 401(k)s, pre-tax accounts? Do you have pre-tax 403(b)s? Where do you think those taxes are going? So if taxes go up in the future, understand that the value of those accounts go down because those are pre-tax accounts.
And then the other thing to think about, I was sitting with a client yesterday, and we also not only have to worry about income taxes, but we also have to think about estate taxes. And Biden has proposed lowering the estate tax. So now it’s going to affect more individuals. And there’s certain things that we can only do while we have this window of opportunity of the Tax Cuts and Jobs Act and before the estate tax exemption gets lowered. So I think taxes are one of the biggest risks in retirement right now. And it’s one of the biggest opportunities because we have this window of opportunity of when we can take advantage of certain tax planning strategies. Maybe we’re looking at Roth conversions, maybe we’re looking at LIRPs, which are life insurance retirement plans, where the money can grow tax-free. Maybe we’re looking at family inheritance trust to remove money from your estate so they don’t count for estate tax purposes. Understand, we have a window of opportunity to do these things.
Tax Bomb
I was sitting with another client just the other day, and they had a large pre-tax account and we developed a strategy to move that money over to the tax-free side. So if taxes do go up in the future, they’re not going to be affected. So think about all this spending as it relates to your traditional IRAs and 401(k)s, and understand that in those accounts, you have a ticking tax time bomb called required minimum distributions. That once you reach 72, whether you like it or not, you’re going to have to start pulling money out of those accounts.
So this family I was sitting with, they had sat with their CPA prior to working with us. And their CPA was trying to minimize taxes right now to get them in the lowest tax bracket possible. But once I showed them that they had this ticking tax time bomb that’s going to hit them in a couple years, where now all of a sudden they’re going from very low income to now a very high income because of these required minimum distributions that’s also going to affect their Medicare, you could see their eyes just get wide with, “I didn’t even think about that.” So it’s a little bit sometimes like ripping off a band-aid. Maybe we pay a little more tax now to save a lot of taxes in the long run.
And if you want some more information, just reach out to us. More than happy to share. But again, think about all the federal spending that’s going on and what effect will that have in the future on your pre-tax retirement accounts. This has been Chris Berry with Castle Wealth Group. Thank you.
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.