Higher Taxes and Rising Inflation. A Lethal Combination for your Retirement.

How rising inflation could threaten your lifestyle in retirement.
Emphasize how today’s rising inflation could impact your ability to afford the things you want and need in retirement. Inflation lowers your purchasing power. The value of your retirement savings could become less and less, year after year. Inflation is impacting Americans for the first time in 13 years. With significant spikes of 4.2% inflation in April and 5% in May, retirees (and people nearing retirement) are on high alert.

Strategies you can use now to stay ahead of inflation.
Emphasize the importance of having investment options in retirement that could beat or hedge against inflation. Warren Buffett says the challenges posed by inflation is like running up a down escalator. Buffett believes investing in businesses that require very little capital to keep their earnings up is a hedge against inflation. Other options are “inflation beaters” that have a track record for growing your long-term investments at a rate above inflation.

Brace yourself for higher taxes in retirement.
Explain how 57% of Americans rarely consider how much they will pay in taxes in retirement according to Nationwide Retirement Institute. You’ll be taxed the same as you were while working at your regular income tax rates on – IRA and 401K withdrawals, dividend and pension income, real estate income, etc. And you could be taxed on up to 85% of your social security benefits.

A recent Wall Street Journal headline read: President “Biden plans middle-class tax hike.” And in the article, it said “the White House budget team would be looking to shake revenue out of every available American taxpayer” to help pay down our government’s skyrocketing national debt and soaring new spending allocated for other initiatives. The proposed $6 trillion budget released by the White House would take the United States to its highest sustained levels of spending since World War 2.

What is the difference between tax preparation versus tax planning?

Explain how most people follow the “status quo” of having their CPA prepare their tax returns each year to find out what they owe the IRS. This is tax preparation. And it does nothing to help you significantly reduce your taxes. In fact, limiting yourself to tax preparation could end-up costing you hundreds of thousands of dollars more in taxes (even millions for high earners) throughout your retirement.

Tax preparation is as routine as taking your car in for an oil change. You may be shocked to hear that according to the US Government General Accountability Office (Forbes article) nearly $1 billion dollars in unnecessary taxes were paid by millions of tax payers (that could have legally been avoided) earlier this millennium. Tax preparation is simply looking backward at the money you owe the IRS.