How to Protect Your Wealth From Inevitably Higher Taxes…

by Marc Courtenay

At a recent Investment U Conference, a ton of attendees confessed to me that higher taxes were among their chief concerns. And the last thing retired people need is a tax hike.

And considering that the federal government's deficit is expected to swell to over $1.5 trillion this year, tax increases are a foregone conclusion.

But like I pointed out at the conference, we don't have to be sitting ducks when it comes to protecting our money from the coming tax-rate changes.

We just need to be proactive and incorporate strategies designed to help reduce the potential negative impact of whatever tax changes come our way.

The "Get it Over With Now" Strategy

If you're like me, and expect your tax rate to be higher when you retire, consider an "after-tax" saving strategy. Such an approach allows you to grow your retirement funds with after-tax dollars. It also removes the uncertainty of where tax rates will be in the future when you decide to withdraw funds.

Contributions to a Roth IRA (if you meet the requirements) represent a great way to use this approach. You can also consider a Roth IRA conversion.

Or speak to your advisor about accelerating your withdrawals from your existing IRAs this year before rates go higher. Just be sure that withdrawing more from your IRAs doesn't put you in a higher tax bracket or create any negative "surprises."

For any of the "get it over with now" strategies, it's important to keep in mind that you probably won't have as many tax deductions in retirement. For example, many people pay off their home mortgages before they retire, which means they don't have the deduction of their mortgage interest to help offset their tax liabilities.

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