Risk of changes to the tax code
As our country’s debt grows, there will be a greater tendency for our elected officials to leave no stone unturned as they search for new sources of revenue.
Does this mean we are at greater risk that the tax rates applied to withdrawals from our IRAs, 401(k) and other tax-postponed retirement plans will be higher in the future?
Does it mean that we are at greater risk that some future Congress will vote to strip away the significant tax advantages that exist in our Roth IRAs and permanent life insurance policies?
Does it mean that we are at risk of losing the deduction on the home mortgage interest we pay?
Managing your exposure to the risk of changes in the tax code can be just as important as limiting your exposure to investment losses or inflation.
Risk of changes to the Social Security
The fact that workers contribute to Social Security through payroll taxes causes many to feel they have earned a “right” to their future retirement income. And while this may be true enough in a moral sense, like it can with all federal entitlement programs, Congress can change the rules regarding eligibility, and it has done so many times over the years.
Risk of changes to economic policy
Will the Federal Reserve continue to increase the supply of money in the economy and increase the risk of high future rates of inflation? Or, at some point will inflation or some other challenge force it to put the brakes on, but do it in a way that results in turmoil in the financial markets?
For good or bad, our government has the power to make changes to the laws that can significantly affect entitlement programs, taxation, monetary policy and many other things that can either directly or indirectly impact a retired person’s finances and security. How can we possibly anticipate all of these risks and prevent them from happening? Of course, we can’t prevent this from happening, but we can take steps to manage our exposure to these risks.
Few things will be more important than your future retirement. And the way time flies, it will happen before you know it. We can help you plan for the inevitable.