Diversify!... Your Taxes?

What is your tax risk in retirement?

What you may have heard before is the saying, "it is better to pay taxes on the seed, rather than the crop". Yet most Americans are so heavily invested (sometimes 100%!) in tax-qualified plans, like IRAs and 401(k)s. This planning only defers the taxes you pay on the future "crop" and at an unpredictable tax rate. With our country’s current federal debt and recent congressional spending, taxes could very likely be higher than they are today. For starters, The Trump Tax Cuts passed in 2017 will sunset in 2025. This means that in 2026 tax brackets are set to revert back to their previous higher levels.

Now, we are not at all against these tax-deferred retirement savings plans. They are fantastic tools for accumulation pre-retirement. I contribute to a matched 401(k) and invest in the stock market myself. However, a plan for tax diversification using Cash Value Life Insurance and/or Long-Term Care Insurance is something to be explored by those that feel their future tax burden is a concern. These tax-advantaged strategies are funded with post-tax dollars, accumulations are tax-deferred, and future benefits and/or income distributions are generally tax-free. Reallocating a portion of your wealth to a strategy that fits your unique goals will hedge against the “tax-unknowns” in your planning. Aside from diversification, you can also ensure that your family, business, and wealth are being protected with the proper Long-Term Care or Life Insurance coverages.

5 Ways Taxes Can Rise in the Future:

1. Your Tax Bracket Changes
2. New Tax Brackets are Signed into Law
3. Deductions are Eliminated
4. The Way Assets are Taxed Changes
5. New Taxes are Enacted

At Emmanuel Insurance we specialize in creating tax-advantaged strategies for successful blue-collar business owners to protect their family, business, and wealth. Our 360 program is designed to uncover risks to the plan, strategize effective solutions to those risks, implement them in an efficient manner, and monitor the plan on a regular basis so that they continue to align with your goals.

It is important to note that this information is not intended to provide tax, legal or investment advice. You should always consult with a qualified professional about your individual situation.