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The Power of Zero

Tax Rate Increases and the "Bucket" Solution

As the US Debt spirals out of control, society is threatened by the disrupt of traditional retirement plans by a freight train of monstrous taxes. With tax rates being at a low in recent years, academic economists, fiscally concerned politicians, and the nation's top financial advisors all predict the inevitable rise of tax rates.

Which Direction are future tax rates going?

Empirically, we are currently at a period of historically low tax rates. David Walker, former Comptroller General for the United States stated: Based on the current fiscal path, future tax rates will have to double or our country could go bankrupt. 

Furthermore, the Congressional Budget Office explained that: if Social Security, Medicare, and Medicaid go unchanged, the government could be forced to adopt a three-bucket system in which some of your income gets taxed at 25%, some at 63%, and some at an astounding 88%. 

The best way to manage this uncertainty of future tax rates is to hold your retirement in a mix of pre and post-tax advantaged accounts "buckets". That way you can choose which accounts you wish to draw income from for maximum tax efficiency.

The 2017 Tax Act lowered tax rates. Those rate are set to expire in 2026. However, after each election season, we don't know if we can depend on lower rates lasting. 

Make 2019 count and discuss with me ways to shift money from other buckets to Tax Free.