The Power of Zero, Revised and Updated by David McKnight & Ed Slott

The Power of Zero, Revised and Updated by David McKnight & Ed Slott

Author:David McKnight & Ed Slott
Language: eng
Format: epub
Publisher: The Crown Publishing Group
Published: 2018-09-03T16:00:00+00:00


SIX

THE TAX SALE OF A LIFETIME

When The Power of Zero was first published in 2014, the national debt was $15 trillion and climbing. Baby boomers were marching out of the workforce and onto the rolls of Social Security and Medicare at the alarming rate of nearly 10,000 per day. At the time, nationally renowned economists were sounding the warning cry about the crippling and unsustainable costs of these so-called entitlement programs. Simply put, our government had promised way more than it could afford to deliver. The solution at the time was both draconian and severe: We could either double taxes, reduce spending by half, or some combination of the two. Failing to act quickly would only compound the pain of the eventual fix.

Now, four years later, even as our national debt has ballooned to $21 trillion and the evidence for higher future tax rates continues to mount, Americans still have a hard time paying their taxes before the IRS absolutely requires it of them. Why? Because there’s still a small part of us that says maybe, just maybe, our taxes will be lower in retirement. Maybe the math to which David Walker referred doesn’t really add up after all. And if that’s the case, why pay taxes at full price if a tax sale might just be lurking around the corner? I mean, come on, could tax rates in the future really be higher than they are today?

This question got answered with a resounding “Yes!” when Congress passed the Tax Cut and Jobs Act of 2017. With a stroke of the pen, our federal government inaugurated an eight-year period starting January 1, 2018, during which you will experience the lowest tax rates you’re likely to see in your lifetime. Because of the sunset clause that was built into this legislation, the tax sale ends on January 1, 2026. As soon as the clock strikes midnight, taxes will revert to their pre-2018 levels. All Congress has to do in order for your taxes to go up eight years from now is, well…nothing.

You now have math and certainty in your corner when it comes to making a critical tax payment decision that may well determine how long your money lasts in retirement. We went from an era where we knew that in some vague and distant future taxes were likely to go up, to an era where we now know the exact year and the day when taxes will go up. Remember the story of twin brothers Gary and Doug from Chapter 4? If your tax rate in 2026 or beyond is even 1% higher than it is today, then continuing to grow and compound your retirement dollars in 401(k)s and IRAs will curtail the life of your retirement assets.



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