Are you a Baby Boomer on the cusp of retirement? Perhaps your years away but want to ensure you’re a good spot to retire comfortably. Either way, properly preparing for retirement is essential. That’s why I often recommend helpful resources to my clients in the pre-planning stage. One of those resources is a documentary called, The Power of Zero: The Tax Train is Coming. Keep reading for the scoop on this thought-provoking film.
Summary of The Power of Zero
“There's a massive freight train bearing down on the average American investor, and it's coming in the form of higher taxes.” - David McKnight, The Power of Zero
This documentary is based on a book written by David McKnight. The film examines how the U.S. National Debt has increased and will continue to do so over the next ten years. With an in-depth look at the cause and the expected result, the documentary discusses the impact the national debt crisis will have on Baby Boomers during retirement. The Power of Zero also provides viewers with proactive steps and measures they can take to protect themselves (and their retirement savings) from the threat of higher taxes.
The Power of Zero covers topics like:
• The cause of tax increases
• Why relying solely on 401(k)s and IRA can set you up to pay more during retirement
• How to combat the impact of rising tax rates on your retirement funds
How Higher Taxes Impact Future Generations During Retirement
Over the years, the U.S. government has continued to push programs like Social Security and Medicare on Americans but have failed to deliver on the promises they’ve made. As more and more promises are made, the only way they can make these programs work is to raise taxes. In fact, experts say the tax rate will need to double just to keep the country’s economy above water. So, how does this impact the average American?
Most Americans have been conditioned to think there is only one major vehicle to saving for retirement: tax-deferred investments. Traditionally, that means utilizing an employer-backed 401(k) or IRA. These tax-deferred retirement accounts generally operate on two beliefs.
- Americans qualifying for retirement will be a lower tax bracket than when employed.
- Future tax rates will be lower than they are today.
With tax rates expected to rise significantly over the next ten years, neither of these beliefs hold much weight. This poses an important question; If taxes are expected to increase, why defer taxes now only to pay more in the future? The answer? You shouldn’t! The goal should be to keep as much of your retirement savings as you can, so you don’t go broke during retirement.
Rather than relying solely on tax-deferred retirement accounts, you need to start thinking outside the box. Creating a well-rounded strategy utilizing various forms of wealth building methods can set you up for success. This often means blending tax-deferred savings with a mix of products backed by actuarial science like a properly structured whole life insurance policy. These types of strategies vary from person to person, so having a clear understanding of your finances and future goals is helpful.