The situation with the Biden infrastructure plan continues to evolve. Senators Joe Manchin and Krysten Sinema have continued to be obstacles in the Democrats’ way from getting the bill passed.
The Democrat caucus has been in disarray and seems to be pulling in different directions. Biden was hoping the bill would pass by having everyone vote before the legislation was written prior to him landing in Rome. Right now, it looks like things are dead in the water including raising tax rates on the rich.
The big question is whether the Trump tax code will remain in place until 2026. Joe Biden has expressed his desire to raise taxes on the rich, and the easiest way for him to do that is to simply let them expire.
For most Americans, this means that if you want to shift your money from tax-deferred to tax-free, you have just five years left. The fewer years you have to shift your money, the more likely you are to rise into a tax bracket that is going to give you heartburn.
Whatever happens in the next week is going to determine how people plan for retirement in a significant way and is going to determine the legacy of the Joe Biden presidency.
Will Congress simply change the laws regarding Roth accounts? Not likely. To do so at this point would cause political and economic chaos. The Roth IRA is also one of the accounts that both the federal government and the average American likes. If anything, the government will try to make the Roth IRA even more attractive in order to raise more tax revenue now.
David is currently writing a new novel based on the very real threat of the Modern Monetary Theory to America. There is a massive fiscal gap in the US of $239 trillion dollars which is going to have to be dealt with eventually, but the Modern Monetary Theory has been saying the debt is nothing to worry about.
Modern Monetary Theory is becoming more in vogue recently with many politicians advocating it as a solution to our economic woes.
Inflation is already here. We feel it at the grocery store and in our everyday expenses, but we are just at the tip of the iceberg.
There is no question that inflation is coming, but whenever MMT proponents are asked about it, it’s never their fault. We have been practicing MMT for decades at this point, and eventually we will get to the point where interest rates begin to rise toward historical averages. When that happens the interest on the debt will consume the federal budget.
Social Security, Medicare, and MediCaid are tied by law to inflation, so when money is printed to pay for those programs their cost goes up commensurately. It’s not possible to print enough money to solve the issue.
Longevity risk is a major concern for all retirees, and one of the ways to mitigate it is with the 4% Rule, or what some economists now call the 3% Rule. The trouble is the rule is a very expensive way to mitigate the risk. The alternative is with a guaranteed income annuity.
The financial industry has accepted the reality of longevity risk and the benefits of annuities in mitigating that risk, but since the standard is to implement that annuity in the tax-deferred bucket it comes with a number of drawbacks and other risks.
Some companies allow for piecemeal Roth conversions which allow you to convert that annuity money to tax-free.
For people who say annuities are not for them, they aren’t going to like Social Security or their company pension plan since they operate exactly the same way.
The Power of Zero paradigm basically says that tax rates are going to rise dramatically in the near future, and when you have the majority of your money in tax-deferred accounts like 401(k)s and IRAs, you are at risk. David advocates for five or more streams of tax-free income including the Roth IRA, Roth 401(k), Roth conversions, and LIRP.
The LIRP stands out because of its additional features of mitigating long-term care and coming with a death benefit.
Very few Americans will be exposed to the estate tax even if it’s lowered by Joe Biden. There are strategies you can use to avoid going past that threshold.
David’s number one tip as a father of seven is that you have to remember to stop and smell the roses along the way. Have a long-term perspective and know there are precious moments that will pass you by.
Starting a life insurance policy is like getting married, it only really works if it’s until death do you part. You have to make sure you have a list of things in mind when picking a policy. They are long-term contracts so have a long-term perspective when choosing one.
Required Minimum Distributions may be impacted by the Secure Retirement Act working its way through Congress right now, but RMDs only affect 20% of Americans since most people will be accessing in excess of their RMD.
The death of the stretch IRA is a big deal and puts an emphasis on converting your IRA to tax-free today. Even if you think your tax rate is higher now, it may still be lower than your kid’s tax rates in which case you should strongly think about doing Roth conversions today.