Contrary to popular belief, tax rates in the United States has actually gone down when compared to historic times. Take a look at this interactive chart from http://qz.com/74271/income-tax-rates-since-1913/
However, this trends of reduced tax rate is not expected to continue into the future. The Census Bureau estimated that by 2029, the baby boomer population will be approximately 61 million which is about 20% of the US population. These boomers will be drawing on their medicare and social security which currently does not have enough funds to support that many people. This means that money will have to either come in the form of reduced government spending or increased taxes.
Moreover, the amount of boomers retiring will cause a reduction in the workforce. This is going to be happen simultaneously with the increased demand in medicare and social security. Government will have to increase taxes for the working population who will be outnumbered by their boomer retirees.
With this crisis looming, we need to be more proactive in protecting our future investment and engaging in prudent tax planning. Some ways of gaining more control of taxes paid on your future income are:
- Setting up Roth retirement accounts
- Real estate investment
- Investing in a business
- Municipal bonds
- Taking part in employer sponsored benefits like health coverage
I hate to say this but with all the trends taking place in the United States right now, the middle class will soon cease to exist. There is no place for complacency anymore as you will find yourself in the slaughter house. Get some financial education and more importantly sit down with your Certified Public Accountant to begin discussing strategies before it’s too late.
“IRS CIRCULAR 230 DISCLOSURE: IRS regulations require that we inform you that any U.S. federal tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein. If you would like an opinion that can be used for such purposes please contact the sender.”