2020 Election Results

Will Taxes Change Again Under the Biden Administration?

Along with a new president comes new rules and laws. 2018 brought us a new tax law with mostly lower rates, but it is set to expire in 2025. What should you be thinking about now? In the video below, Josh discusses what retirees especially need to be thinking about now.

Video Transcript

The year 2000, the presidential race between George Bush and Al Gore was the very first presidential race that I was old enough to vote in. I’ll never forget watching the hanging CHADS in Florida and all that fun stuff that I’m sure we all remember. Fast forward to today, we have another contested and controversial election.

Well, it sure looks like we’re going to have a new president come January. And with a new president brings all sorts of new rules and new laws and things along those lines. Now, as I’m recording this video, we do not yet know who’s going to control the Senate or the complete control of the Congress, but there are some things that we want to be aware of.

And when I’m talking about planning opportunities here with this new presidency and the new regime, I am not making any political statements. When I’m talking here, I am specifically talking how it’s going to impact you and your finances. What I’m saying here, isn’t, “what’s good for the economy” or “bad for the economy.”

We have a whole other conversation about that, but this is particularly about you and your finances. And the one area that I think we can all agree on, that’s going to have a huge impact, is taxes. In 2018, we had a new tax law that came into effect. And this was the new, the big Trump tax law.

And essentially what it did that, that had an impact on you is it lowered the tax brackets for most Americans. So most Americans actually paid a lower tax rate. And when we talk about taxes, I always tell people there’s two types of taxes. Taxes that we don’t necessarily have to pay and there’s taxes that we have to pay no matter what come hell or high water.

And when we have those types of taxes, we want to pay them at the cheapest possible rate. Now, what is that cheapest possible rate? Well, one of the things we looked at for this election is what’s going to happen to the future of taxes. And, the way the tax law was written is that in 2025, we automatically go back to our old tax rates. So tax rates automatically go up in 2025.

And that’s important because if you have a tax that has to be paid, maybe in between now and 2025 is a cheaper time to pay that than into the future. But what are some other areas that we look at? Well we look at some of the programs and some of the different, conversations that president elect Biden is putting out there. And all of those could lead to somewhat higher taxes, depending upon the situation you find yourself in.

So be aware of how that impacts you and your retirement. There’s all sorts of different things we should look at. We should be looking at capital gains tax. We should be looking at estate taxes. We should be looking at what’s impacted your income taxes as well, which for the most part, I am talking about taxes that are going to occur on your IRA and 401k distributions.

So while we need to dig into this election into a lot more detail, make sure you pay attention to taxes. And if you’ve heard me talk before, you’ve heard me talk over and over again how important taxes are in your retirement planning. Yes, it’s really important to have a good asset allocation. Yes, it’s really important to maximize your social security, but understanding the role of taxes is extremely important and now more than ever. Time is becoming of the essence here.

And, you look at things through different lenses, make sure you look at things how they’re going to impact you. And no matter what your feelings are for the election, really happy, really sad, really angry, whatever they might be. Make sure you’re taking care of yourself. And one of those ways that you could do that is looking at the risk of taxes in your retirement.

I hope you got some value out of the video you just watched. And if you know somebody else that could benefit from this, I encourage you to share this video with them. If you’d like to discuss your personal situation further, there is a link below to schedule a free 15 minute phone call with us. Thanks, have a great day.