U.S. National Debt
If you’ve like most Americans, you’ve been saving for retirement in accounts like 401(K)s and IRAs – with the plan of deferring (postponing) the taxes until you take distributions in retirement. Many believe they will be in a lower tax bracket in retirement, and some will, but many who’ve done a good job saving for retirement might have an unpleasant surprise – even if tax rates stay at current rates. What happens if tax rates go up? Did you know that tax rates are scheduled to go back up?!
Just for a moment, imagine you need to borrow some money. It could be for a house, a car, a boat, etc. The loan officer enthusiastically informs you that you have been approved for the loan but with one condition. The bank will decide what the interest is after you borrow the money! Would you borrow the money?
So you might ask, what does this have to do with your retirement account and your Social Security benefits. Well, does anyone know what tax rates will be in the future or how much the government will need to run the government with a National Debt in excess of $22 TRILLION and roughly 10,000 Baby Boomers turning 65 and going on Medicare every day until the year 2040? This begs the question . . . How much of your hard-earned money will you really get to keep? Answer: Unless you can accurately predict what tax rates will be when you make withdrawals, you simply don’t know how much of your retirement account or your Social Security benefit is really yours to keep!