One of the most important ways a financial planner helps clients is by minimizing the taxation on their income. Tax-deferred qualified plans receive much of the focus during the accumulation years, but what about reducing taxes in retirement?
Chances are, your clients are in a lower marginal tax bracket now than they will be in the future. Two factors suggest that tax rates are likely to increase over time: current tax rates are set to expire in 2026 and, absent congressional action, return to pre-2018 levels; and future financial obligations of the U.S. government to entitlement programs may necessitate higher rates. To account for this probability, the key is to find additional future tax-free income for your clients.