With frenzy of the holiday season in full swing, everyone is looking for the best deals. Who doesn’t like saving some cash?
In 2012, Dr. Paul J. Zak, professor of Neuroeconomics at Claremont Graduate University led a study to learn how coupons impact people’s happiness, health, and stress. It was discovered that coupon recipients who got a $10 voucher experienced a 38 percent rise in oxytocin levels and were 11 percent happier than those who did not receive a coupon. Furthermore, their respiration rates dropped 32 percent, heart rates decreased by 5 percent and sweat levels were reportedly 20 times lower than their peers. Consequently, they felt more relaxed and less stressed.
One area of our finances that typically causes the opposite reaction is TAXES.
As Ben Franklin said, “In this world, nothing can be said to be certain, except death and taxes.”
Taxes consume a signficant portion of our wealth each year in the form of payroll, federal income, state income, property, sales, and capital gains that are slowing our ability to save and invest for the future. Each tax dollar paid is essentially a loss as the money is no longer in our possession to earn into the future. This is true. However, you also need to consider what future taxes will be and their impact to your wealth.
Most w-2 earners feel they have very few options to save on taxes and are directed by their CPAs and Financial Advisors to simply defer (aka postpone) them through 401k or IRA contributions. Although this may have been a viable strategy when tax rates were extraordinary high, we are actually at historically low taxes currently. Take a look at the below history of tax rates where the top brackets ranged from 70-90% from 1940s – early 1980s. Delaying the payment of tax now may feel good, but it cause some sigifnicant headaches down the road.
Add this to the fact that the U.S. government is carrying over $23 trillion in debt and running over a $1 trillion deficit in 2019 when the economy is supposed to be good. Check out the a real time look at the US Government debt https://usdebtclock.org/.
How about the unfunded liabilities for Social Security and Medicare that are estimated to be over $100 trillion?
Where do you think tax rates could be going? Who has control to make changes to the tax rates that may drastically impact the taxes you pay on your retirement plans when you need them most? It’s your silent partner…the U.S. Government and the IRS.
TAXES ARE ON SALE NOW!
It’s time to start thinking about strategies to position your dollars to so they are immune to the impact of future tax rate hikes that will steal your wealth you worked so hard to generate. What if you could grow portions of your wealth without the fear of what future tax rates will be?
The tax code is simply a set of incentives; you just need to follow them to keep more of your wealth in this generation and for generations to come.