Do You Know the Impact of Your Future Taxes?
As wealth planners, we get a lot of “ah ha” moments when we help our pilot clients initially address problems they know they have. But the biggest “ah ha” moments are when we explain and address a problem or present an opportunity that they didn’t even know was out there. These problems and opportunities come in many flavors all across the financial spectrum. We’ve found that they exist due to a lack of Situational Awareness (SA).
I’m confident that one of the areas where we receive the most “ah ha” moments is when we reveal the amount of taxes that a pilot 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? Do you know how much you will pay in Federal and State taxes after you taxi through your water cannon salute?
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.
The graphic below shows the projections for this client’s taxes. Note how the graph shows taxes increasing 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, I’m sure you want to keep as much of your hard earned income as possible.
So what can you do? The first step 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 tax situation each year. In their current proposals, congress wants to take away some of the techniques that you might be able to use to reduce future taxes, so don’t wait to get started.
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.
As always, safe flying,
The Wings Wealth Management team
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. Economic forecasts set forth may not develop as predicted. LPL Financial and Wings Wealth Management do not offer tax advice or services. The examples presented are hypothetical and are not representative of any specific situation. Your results may vary.