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In this week’s Hidden Wealth Review, I want to talk about the higher tax risk to you in the $2 trillion Coronavirus Aid, Relief and Economic Security (CARES) Act. The waiver of Required Minimum Distributions (RMDs) will not actually be so beneficial for your future taxes in the long run if you have larger IRAs and 401(k)s. There are top economic advisors who believe the eventual amount of stimulus dollars could be as much as $6 trillion. I’m not sure how many people will misinterpret the waiver of the 2020 RMD but, in a poll last year, 83% of Americans told the Peterson Foundation that politicians should try to lower the U.S. debt. More debt means more needed tax!
In an interview on CBS MoneyWatch, Kenneth Rogoff, a Harvard economist who has written about the risks of spiraling debt, said, “We are in a war. The whole point of not relying on debt excessively in normal times, is precisely to be able to use debt massively and without hesitation in situations like this.”
Required Minimum Distributions (RMDs) are waived. RMDs have been waived for 2020. The deadline for someone who turned 70.5 in 2019 and waited to take their RMD in 2020 was April 1st but the RMD has been waived.
But is this really the best decision? The CARES Act means higher future taxes with the added debt, especially for those who have worked hard and saved in tax-deferred retirement accounts. If there was ever a time to get un-taxed and save tax money, it’s in 2020, under Donald Trump, while tax rates are at an historic low. The other future tax risk danger is the unknown outcome of the election later this year. If Donald Trump is NOT re-elected, it will for sure mean higher taxes.
In this time of crisis, I’m all for keeping people on payrolls and financially supporting industry. We don’t want to lose our economy but the CARES Act will translate into much higher taxes if you wait to pay those taxes at a higher rate in the future.
Here’s why taxes are going up in order to pay for the recently passed stimulus. There are only two ways to pay for CARES: 1) increase taxes or 2) cut federal spending. When you cut federal spending you push in a recession even faster. We also know that Democrats are not in favor of cutting federal spending so, if someone other than Donald Trump is elected in November, you will see massive increases in taxes!
The nation’s debt has more than doubled since the 2008 crash. But, until the coronavirus hit, the U.S. was enjoying its longest economic expansion. With the addition of the $2 trillion from the CARES Act, the national debt will be at about $25 trillion. Six trillion dollars of that $25 trillion is money the government owes to itself! The U.S. must pay interest on its debt so, the total cost of borrowing the $2 trillion for CARES will go up over time. In fiscal 2019, the U.S. paid $580 billion in interest on the national debt.
Whether you’re trying to get to retirement or through retirement, the last thing you want to do is to leave your money in tax-deferred retirement accounts such as 401(k)s and IRAs. Right now is the time to save tax money while taxes and account values are low.
We’ve created a simple way for you to see how much you can save in taxes. Go to TaxesSaved.com and request a Saving Tax Optimization Plan (S.T.O.P.) Analysis. Don’t worry, no surprises, no fine print. The S.T.O,P. Analysis will show you the tax road you’re on so you can compare it to the lesser tax road route you could be taking. This analysis is saving Baby Boomers and retirees large amounts of tax. When you request your S.T.O.P. Analysis, I will gift you my guide, Retirement and Your Taxes, How to Get IRS Out of Your IRAs and Remove Uncle Sam from Your Children’s Inheritance.
The simple truth is, you deserve better. Imagine, less tax for more financial security and more cash flow without having to spend down your savings. More time and money for your family.
P.S. Let me leave you with one final thought: You’ve worked hard for your money, we will work even harder to protect it.
Note: We serve Boomers and Retirees all over the Unites States. We have an efficient, supported process to meet online, as have been doing for over 20 years.
Our online meetings are private, the access is restricted and we never share our meeting link with anyone who’s not a part of the meeting. Let’s get to work!