Plan for the Tax Rates of the Future SHP Financial

Retirees may no longer receive taxable income from an employer, but they will likely receive income from other sources which can be taxed. And while we know what the tax rates are now, we don’t know what they’ll be in 10 or 20 years – or even one year from now. This is why it’s important to plan for the tax rates of the future when it comes to taxes.

Now vs. Tomorrow

Right now, many people are enjoying relatively low tax rates: In 1944, the highest income tax rate was 94%, and in 1978 the maximum capital gains tax rate was almost 40%.[1] Currently, the highest income tax bracket is 37%, and the highest long-term capital gains tax rate is 20%.[2] The Biden administration’s proposed tax changes include several potential tax-increasing measures for certain individuals. The top marginal income tax rate would go from 37% to 39.6%, and the long-term capital gains rate of 20% for those making over $1 million would disappear. This means that capital gains would instead be taxed at 39.6%, plus the additional 3.8% Obamacare tax.[3] We could also see an end to the step-up in basis, which would potentially mean a much more significant tax burden for beneficiaries. It’s important to have a plan to help minimize your taxes in retirement whether or not we see all of these changes.

Social Security

To help determine if you will owe tax on your Social Security benefit, add up your adjusted gross income, nontaxable interest, and half of your Social Security benefit. If it’s more than $25,000 as an individual, or more than $32,000 if you’re married and filing jointly, then you will likely owe tax on up to 50% of your benefit. As a single filer, if your combined income is more than $34,000, or as a married couple filing jointly with combined income over $44,000, then up to 85% of your benefit can be taxed.[4] This is why integrating a Social Security maximization strategy with an overall plan to help minimize your tax burden in retirement is vital when planning for your future self.

Retirement Account Distributions

If you have a traditional 401(k) or IRA, you will transition from enjoying their tax-deferred status to paying taxes on distributions in retirement. Even if you don’t need the money right away, you will eventually have to start withdrawing from them annually after you turn age 72. Distributions from Roth accounts, however, are not taxed because they are funded with after-tax dollars. One tax minimization strategy to consider is to convert funds from traditional retirement accounts such as 401(k)s and IRAs to a Roth account. In this case, you would pay tax on the amount converted at today’s rates rather than pay the unknown rates of the future on distributions from a traditional retirement account.

We can help you plan for the long-term by assessing your current situation and potential future tax burden in retirement. Taxes don’t disappear in retirement, so plan for your future self. At SHP Financial we offer complimentary financial reviews so that you can get your questions answered, and we can help you take the first step towards creating a comprehensive retirement plan built to last for the long road ahead. Click HERE to sign up for a time to talk with us.

[1] https://taxfoundation.org/federal-capital-gains-tax-collections-1954-2009/
[2] https://www.irs.gov/newsroom/irs-provides-tax-inflation-adjustments-for-tax-year-2019
[3] https://www.forbes.com/sites/robertwood/2021/06/07/biden-retroactively-doubles-capital-gain-tax-but-keeps-10m-benefit/?sh=1b563b1bc4b4
[4] https://www.ssa.gov/planners/taxes.html


The content presented is for informational purposes only and is not intended as offering financial, tax, or legal advice, and should not be considered a solicitation for the purchase or sale of any security. Some of the informational content presented was prepared and provided by Lone Beacon Media, LLC dba Lone Beacon, while other content presented may be from outside sources believed to be providing accurate information. Regardless of source no representations or warranties as to the completeness or accuracy of any information presented is implied. Lone Beacon Media, LLC is not affiliated with the Advisor, Advisor’s RIA, Broker-Dealer, or any state or SEC registered investment advisory firm. Before making any decisions you should consult a tax or legal professional to discuss your personal situation.

Investment Advisory Services are offered through SHP Wealth Management LLC., an SEC registered investment advisor. Insurance sales are offered through SHP Financial, LLC. These are separate entities, Matthew Chapman Peck, CFP®, CIMA®, Derek Louis Gregoire, and Keith Winslow Ellis Jr. are independent licensed insurance agents, and Owners/Partners of an insurance agency, SHP Financial, LLC.. In addition, other supervised persons of SHP Wealth Management, LLC. are independent licensed insurance agents of SHP Financial, LLC. No statements made shall constitute tax, legal or accounting advice. You should consult your own legal or tax professional before investing. Both SHP Wealth Management, LLC. and SHP Financial, LLC. will offer clients advice and/or products from each entity. No client is under any obligation to purchase any insurance product.


The content presented is for informational purposes only and is not intended as offering financial, tax, or legal advice, and should not be considered a solicitation for the purchase or sale of any security. Some of the informational content presented was prepared and provided by tMedia, LLC, while other content presented may be from outside sources believed to be providing accurate information. Regardless of source no representations or warranties as to the completeness or accuracy of any information presented is implied. tMedia, LLC is not affiliated with the Advisor, Advisor’s RIA, Broker-Dealer, or any state or SEC registered investment advisory firm. Before making any decisions you should consult a tax or legal professional to discuss your personal situation.Investment Advisory Services are offered through SHP Wealth Management LLC., an SEC registered investment advisor. Insurance sales are offered through SHP Financial, LLC. These are separate entities, Matthew Chapman Peck, CFP®, CIMA®, Derek Louis Gregoire, and Keith Winslow Ellis Jr. are independent licensed insurance agents, and Owners/Partners of an insurance agency, SHP Financial, LLC.. In addition, other supervised persons of SHP Wealth Management, LLC. are independent licensed insurance agents of SHP Financial, LLC. No statements made shall constitute tax, legal or accounting advice. You should consult your own legal or tax professional before investing. Both SHP Wealth Management, LLC. and SHP Financial, LLC. will offer clients advice and/or products from each entity. No client is under any obligation to purchase any insurance product.
Was this information helpful? Should we publish more like this?
YesNo