Major Changes That Could Happen During Your Retirement
Do you ever feel like you live in a completely different world than you did 20 years ago? It’s worth thinking about how different it will be in another 20 years. Beyond cultural and personal changes, we could see major economic changes that could affect us in retirement. It’s always worth knowing what’s going on so you can have a plan to prepare.
Could You See Higher Taxes in the Near Future?
We’ve seen increased government spending due to COVID and plans to spend trillions more. We could pay for it in taxes down the road, and trends suggest that we’re experiencing relatively low income tax rates at the moment. This is why it’s important to plan for the tax rates of the future. The new proposed tax rate for long-term capital gains is 25%, instead of the current 20%. The new 25% rate would be effective retroactively from September 13th, 2021, if new legislation is passed. Additionally, the top bracket would go from 37% to 39.6%, and the threshold would be lowered to $450,000 for married couples filing jointly. There is also a proposed new 3% surtax on Modified Adjusted Gross Income above $5 million for married couples, and $2.5 million for single filers.
The Federal Reserve’s Latest Statements
Federal Reserve Jerome Powell stated that the Federal Reserve is looking into implementing its own digital currency, and we could see more information on this soon. China has already moved forward with plans to do this, and other countries may follow. The Federal Reserve also signaled that they will move up the date of an interest rate hike to 2022. Although inflation has risen higher than expected, they anticipate this to stop and the inflation rate to get closer to the target 2% rate.
What Does This Mean for You?
We live in a constantly changing world, and the traditional strategies that once served retirees may no longer apply. If we see a national digital currency, continued inflation, and persistent low interest rates, you may need to re-examine your retirement game plan. We can help you prepare for the future, no matter what it holds. At Barnett Financial and Tax, we help people create comprehensive retirement plans that are tailored to their unique needs – Click HERE to schedule a time to meet with us to discuss your financial concerns and plans for the future.