Have you ever wondered why Wall Streeters tell ya not to worry about income taxes in retirement, cuz you’ll be in a lower bracket? Let’s take a look at that.
Transcript: Hi Jeff Brown, you probably know me as the “BawldGuy”. Today were going to be talking about retirement and tax brackets. If I read it once I read it a thousand times and I know you have to, when we reach retirement our tax rates going be lower, so don’t worry about it! If there’s anything that is garbage, that’s it and let me explain why — never let me say those things so concretely without explaining. You’re going enter retirement with your kids gone, no more tax reductions for kids, AARP is failed every time it’s tried for the grandchild deduction. You’re going to have paid off your house. Everything else you have that would have given you almost any kind of tax deduction is gone. Bottom line is every April 15th you realize that you’re naked standing in front of the IRS with your checkbook. Now, if you’re making any kind of money in retirement, why would your tax rate be low? Let me tell, your tax rate, for most people in retirement, is lower because they failed in their tax planning. They failed in their retirement income planning. You get taxed lower at a lower rate only because you’re making less money. Duh! So when they tell you that when you retire your tax rate’s going to be lower, it’s only because you didn’t do well and attain the lofty goals for retirement income. Now, let’s look at the bright side: you’re still going to arrive with your children grown, you’re going to have a free and clear house, at least that’s the plan, and you have very few deductions. The idea though is to grow enough income over the years, hopefully you have at least fifteen or twenty years many people have thirty or more, but the idea is that you’re investing and investing and doing things on purpose; slowly but surely with strategies like, different kinds of depreciation, working together with the tax plan with EIULs, taking discounted notes, which we’ll talk about in the future — all those things combined puts you in a tax bracket that’s going to maybe be, not only equal on what you’re used to now, heck it might even be more. Oh, how sad is that, you’re making so much money in retirement you’re at a higher tax bracket. We’ll talk later on how to deal with that, but just understand, if your tax bracket at retirement is lower than it is now it’s because you failed. Sorry to end that bad note, but the idea is not to fail; to be endowed with the tremendous retirement income at retirement. Thanks, this is Jeff Brown the “BawldGuy” saying I’ll see you next time.