We all heard in the news over the last week that lawmakers in Congress and the White House passed a deal to avert the Fiscal Cliff. However, many third party budget watch-dogs feel that this “deal” was a band-aid and failed to cut much if any of the $16.4 Trillion debt or address any of the spending program’s major dark clouds on the horizon. You can read more about that here:
What does this have to do with your retirement? Annuities? Life Insurance? Well, eventually these problems have to be addressed and not just punted down the road. They’ll have to be fixed the same way you and I have to fix our budgets with more revenue or less spending. Neither party has shown the ability to spend less, so the assumption from most experts is higher taxes. This will add a greater emphasis and need for tax deferred vehicles for retirement income. It will also require those with an estate currently larger than $1mil to focus on tax free estate planning tools or face an estate tax penalty of 55%.
And this won’t just be income tax increases for the wealthiest 1%. The current Fiscal Cliff deal only raised taxes on individuals making $200k+ a year. And according to this and many other articles, if this deal did not make much of a dent in the debt, many people fear that taxes will only get higher for all income earners.