Danger in Future Inflation, Interest Rate, and Tax-Law Changes.

6a017c332c5ecb970b01a5116fb332970c-320wiJim Lorenzen, CFP®, AIF®

Back during the 1990s, many Americans, particularly baby-boomers, were focusing on accumulation.  Many of us can remember the focus on mutual funds and a rising stock market.  Today, these same boomers are thinking more about protecting what they’ve saved.

The problem, as is often the case, is Uncle Sam.

For years I’ve believed that our 401(k) and other tax-deferred account statements are misleading.   Someone who’s successful and in his/her 50’s might open their retirement account statement and see a balance of $600,000, for example, and believe they actually have $600,000!

Not likely.  For someone in a 28% federal bracket, for example (we’ll ignore state taxes for  now, but you shouldn’t), the statement should read:

Your money:  $432,000
iStock_UncleSamLiftingWallet_MediumThe Federal Government’s money:  $168,000, unless your tax bracket changes and unless the federal government decides to change how much will be required to fund government operations.  If more is required, the government can increase it’s share of your retirement account without your consent.

And, there lies the problem.

According to this chart, federal finances may experience a bleak future.

201603i_Federal Finances

I aplogize for the poor image quality, but the upper-left depicts the annual deficits both past and projected, while the lower left chart shows the effect of these accumulated deficits

There’s more you should know about this and how this issue, combined with a few others, has important implications for baby boomers who need to navigate the retirement maze in the face of potential rising interest rates, inflation, and tax-increases – all during the years when they’ll be tapping into their nest-eggs.  I’ve included this and a few other charts – all much more legible – and additional information you might find interesting, as well.

Click Here!

Taxes in Retirement: A Potential Time-Bomb for Many!

Jim Lorenzen, CFP®, AIF®

No one knows what taxes will be like in the coming years; but, with a debt that’s rising dramatically and an ageing baby-boomer population moving ever-increasing numbers into retirement, this is a collision that isn’t hard to predict.

For retirees, it’s like being in business with a partner who has the ONLY vote on howiStock_UncleSamLiftingWallet_Mediummuch of the company gross s/he gets to take.  And your partner gets it BEFORE you get to pay the overhead with whatever s/he decides should be left.

Not good.

Is it possible to completely eliminate Uncle Sam as a partner?  I think so.  So do many others, including retirement guru, Ed Slott, who many of you may have seen on PBS and who is also a practicing CPA.

But, is it possible for everyone?  Maybe not; but, almost everyone can mitigate taxes dramatically and many can likely eliminate them completely.

Think about THAT!  Wouldn’t it be nice if you lived through retirement without paying income taxes, regardless of what tax law changes Congress made?  Do the math:  That could really add up!

First, a dose of reality:

  • If you’re retiring now, a tax-free retirement isn’t going to happen.  There are no ‘quick-fixes’, but you can take steps to reduce future taxes, and keep more of your own money.  Everyone’s situation is different, but it’s worth pursuing.
  • If you’re more than ten years away from taking retirement income from your retirement plans (you must begin taking required minimum distributions around the time you turn age 70-1/2), then a tax-free retirement may be very realistic!

How do you begin your journey to a possible tax-free retirement?  You might want to begin by reviewing this 12-page outline, 4 Steps to a Tax-Free Retirement.

IFGi_4 Steps to a Tax Free Retirement_001

This will help you understand your situation, provide a framework for your decision-making, and hopefully get you started on your journey.

You can get your copy by clicking here.




Jim Lorenzen is a CERTIFIED FINANCIAL PLANNER® professional and An Accredited Investment Fiduciary® serving private clients since 1991.   Jim is Founding Principal of The Independent Financial Group, a fee-based registered investment advisor with clients located across the U.S.. He is also licensed for insurance as an independent agent under California license 0C00742. The Independent Financial Group does not provide legal or tax advice and nothing contained herein should be construed as securities or investment advice, nor an opinion regarding the appropriateness of any investment to the individual reader. The general information provided should not be acted upon without obtaining specific legal, tax, and investment advice from an appropriate licensed professional.