Larger deductions WILL continue for most tax-paying Americans regardless of how many itemized deductions you may have until December 31, 2025. This is because of the standard deduction rate of $12,400 for individual filers in 2020, $24,800 for those married filing jointly and if you are over age 65 or blind you can add $1,300 to that amount.
For many Americans those amounts are quite a bit more than their typical itemized deductions
If you fall into the category of someone who believes you will benefit from these ultra-low tax rates, Safe Money Partners is here to help you increase your overall tax awareness so you too can take advantage of them before they sunset in December 2025.
I Prefer NOT to Defer
Jeff Mohlman, retirement income planning consultant, suggests you ask yourself this question: Do you think taxes will be higher or lower in the future?
Why would anyone want to defer paying taxes on money NOW not knowing what the future tax rate will be?
Not in 4 or 5 years, but 10, 15 or even 20 years.
There are so many variables that come into play that help us answer that question: The national debt is one variable, so is the number of baby boomer Americans who will be on Social Security and Medicare in the next 10-20 years.
The shortfall of working Americans paying into Social Security vs the number of retired Americans living on the system.
That number was supposed to be a 2:1 ratio in 2023, but we already hit the 2:1 ratio in 2019!
Long Term Care
Perhaps the biggest wild-card of these variables is the potential number of baby boomer Americans who will need long term care in the future. In a March 27, 2019 article published in The Motley Fool, 79% of Baby Boomers did not have any plan for how they will pay for their retirement health care needs ie long term care.
More concerning yet is that those who said they did have savings set aside for their care the average amount of savings was just $40,000. The U.S. Department of Health and Human Services estimates the average cost of that care to be $138,000 in total for each baby boomer.
Ask yourself another question.
How does the government make money to pay for these and other programs?
That’s right, TAXES!
So you have to ask yourself the question that almost NO ONE is asking: Do I really want to DEFER paying taxes on my money now when I know exactly what my share of the United States tax burden is TODAY or do I want to DEFER paying that tax for many years and then let my government determine how much of my hard-earned savings I get to keep? Seems like an easy question to answer when you have access to the right information.
We understand the complexities of retirement planning, and we can help you get on the right path for a successful financial retirement. If you have questions about your current plan or are interested in finding out better ways to prepare for your future, contact us today.