Considering the stimulus spending going on, tax rates this low aren’t likely to last, so take advantage now.
Back in 2018, when the Tax Cuts and Jobs Act (TCJA) went into effect, did your financial adviser encourage the idea of changing how you save for retirement?
If you took action, you likely established a strategy to withdraw some or even all of the money from your tax-deferred retirement accounts in order to pay the taxes now at the historically low rates set by the TCJA. Moving those funds to a Roth IRA or some other after-tax instrument will likely save you much more in taxes later.
If you didn’t take action then, it may be even more beneficial now; a nudge from your adviser may turn into a shove this year. Why? Several reasons.
Most beneficial modifications to the individual income tax system will expire at the end of 2025, which means the window of opportunity is closing for those who are worried about potential future tax increases. In other words, there’s no guarantee that the current low tax rates will continue beyond 2025.
There’s now added incentive to move money into a lower tax environment, thanks to the effects that COVID-19 is having on the U.S. economy.
Prior to the pandemic, there was already great concern about the federal debt, which was $22.8 trillion at the end of 2019. But with coronavirus relief spending and stimulus programs continuing to swell, the national debt now tops $26.5 trillion and is expected to grow even higher.