Do you think taxes in the future will go up or down?  Before you answer that question take a look at the historical top marginal income tax rates by decade.

1920 73%
1930 25%
1940 81%
1950 91%
1960 81%
1970 72%
1980 70%
1990 31%
2000 40%
2010 35%

With the enactment of ERISA in 1974 taxpayers could contribute up to $1,500 per year into an retirement plan and reduce their taxable income by the amount of their contributions. In 1974 the top US marginal income tax rate was 70%.  Many knew it made good sense at that time to defer paying taxes if they could for as long as possible, preferably to sometime in the future when they would be in a lower tax bracket.

From 1946 to 1964, 79 million Americans were born and represent the baby boomer generation. By 1974 when ERISA was enacted, the first baby boomer would’ve been 28 years old.  Baby boomers have grown up with retirement plans and many of the people we meet have been contributing to one most of their adult working lives.

The financial crisis hit in 2008 just as the first baby boomer turned 62 and became eligible for their early social security benefits.

Our national debt is currently over $16 trillion dollars, marginal income tax rates are currently near record low levels, and the baby boomers are all headed toward retirement and beginning to draw assets out of their IRAs to fund their retirement years.    

Many of the people we have met with over the years are concerned that tax rates are likely to rise in the future. They are concerned that we will continue to experience a lot of volatility in the stock market as the baby boomer generation retires and begins to shift away from accumulating assets to the distribution of those assets. And they are concerned because our Government persists on spending more every year than we collect in taxes and printing money to prop up our economy. Because of this we will likely see both tax increases and inflation in the future.

These are challenging times that require us to think!  Following outdated, static, cookie cutter advice and not having a plan to address these concerns could be detrimental to your retirement.