As clients age, they tend to have many of the same concerns and questions when planning for the future.
Below are some common questions:
What if my taxes, cost of living or medical expenses increase substantially?
What if I am forced into retirement?
What if I become disabled?
What if I live too long?
What if I die too soon?
What if I do nothing?
What Do We See Improving in 2021?
Tax Items to Watch for Prior to 2021
Under current law, pretax retirement plan contributions are deducted from marginal tax rates. .A taxpayer in the 37% tax bracket that contributes $10,000 to a pretax 401(k) would save $3700 in taxes. The new proposal would make this a flat deduction (i.e. 25%) for everyone. .In the example given, the $3700 tax benefit would be reduced to $2500.
- Accelerate gifting to charities etc. if above the 24% marginal tax rate.
- Itemize as many deductions as possible in 2020 before phase-outs are re-instituted.
- If above the $10,000 threshold, hold off paying state and local taxes until 2021.
- Accelerate income in 2020 at lower tax rates - particularly through Roth conversions, etc.
- Accelerate Savings in retirement plans while full deductibility is still available.
- Consider recognizing gains in taxable accounts at current capital gains tax rates.
- Revisit strategy of whether to fund pre-tax or Roth IRA/401(k)/403(b).
- Strongly consider filing for loan forgiveness in 2020 rather than waiting until 2021.
- Look to use operating losses to offset Roth conversions before new tax laws are enacted.
- Look to reverse Required Minimum Distributions made in 2020 and reclassify excess funds as Roth Conversions.