The Coming Tax Freight Train of Higher Taxes
The inevitability of higher taxes in the future has often been likened to an oncoming freight train. Why? Because Americans who do their retirement savings in tax-deferred investment accounts such as IRAs in 401(k)s, find themselves sitting on the train tracks with a very real tax freight train bearing down on them. Some experts such as former comptroller general of the US government, David Walker have suggested that tax rates have to double just to keep our country solvent. If tax rates double, how much of your hard-earned retirement savings will you really get to keep? The only way to truly insulate yourself from the impact of higher taxes is to systematically shift your assets out of tax-deferred investments and into tax-free investments. But there’s a caveat: You want to shift your assets slowly enough that you don’t pay too much in tax in any given year, but quickly enough that you get all the heavy lifting done before tax rates go up for good.
To read about a real-life scenario where a couple was spared the impact of an oncoming train through the actions of a good Samaritan, click on the following link.