Do You Know The Impact Of Your Future Taxes?
I was watching a webinar the other day where the speaker was helping advisors understand how they can create value for their clients…meaningful value. The primary area of focus was helping clients address problems that they don’t know they have. As I reflected on this idea, it occurred to me how accurate this really is. To be sure, we do get a lot of “ah ha” moments when we help our clients initially address problems they know they have.
But the biggest “ah ha” moments are when we explain and address a problem or an opportunity that they didn’t even know was out there. These problems and opportunities come in many flavors all across the financial spectrum. And they exist due to a lack of Situational Awareness (SA). Most of the time, it’s the client who lacks the SA, but sometimes advisors lack the SA too.
So I started thinking about the areas where I most often see a lack of SA among our clients. I’m confident that one of the areas where I receive the most “ah ha” moments is when I reveal the amount of taxes that a family will pay during retirement. Here’s the sad truth: for most of you, taxes will be your biggest expense during retirement. Did you know that? Have you forecast your retirement taxes?
Just the other day, one of our new clients was shocked when I showed him that his retirement tax bill was projected to be over $1,000,000! And this assumes that his tax rates won’t go up from current levels. Given our current national debt and politicians’ desire to spend as much as they can, I’m confident that his and your tax rates will increase in the future.
Check out the graphic below that shows projections for this client’s taxes. Note how the graph shows increasing taxes during retirement. And, due to the recent tax law changes, if this client passes away, his spouse will jump into an even higher tax bracket! You have worked hard for way too long to not pay attention to this. If you are like our clients, you want to keep as much of your hard earned income as possible.
Your next step is to calculate and forecast your retirement tax bill. Then, determine if you can take any actions to reduce your future taxes. Each year, rinse and repeat – meaning tax planning is not a set it and forget it process. To get the most bang for your buck, you need to analyze your situation each year. And don’t wait to get started – in their current proposals, congress wants to take away some of the techniques that you might be able to use to reduce future taxes.
As part of Planning, Guidance and Advice, we deliver future tax planning for our clients. If you are concerned about keeping as much of your income as you can, please reach out to us. We will perform a complimentary analysis of your situation to determine if we can help you.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. This is a hypothetical example and is not representative of any specific investment. Future individual tax rates may vary. LPL Financial and Second Half Strategies do not offer tax advice or services.