Don't Retire Broke! - Rodgers & Associates

Don’t Retire Broke!

The New Three-Legged Stool

A Tax-efficient Approach to Retirement Planning was published in June of 2009. People had been told for years that they would be in a lower tax bracket when they retired. All they needed to do for retirement was to defer their income until then through employer sponsored plans like a 401(k) or through tradi­tional IRAs and tax-deferred annuities.

I wrote the book to make people aware that tax rates were likely going higher. They might be able to retire to a lower tax bracket but only if they planned for it. The path to lower income taxes was the New Three-Legged Stool™ strategy.

A lot of things have changed over the last seven years. Unfor­tu­nately, one of the things that hasn’t changed is the direction of income taxes. Our country’s national debt totaled more than $10.9 trillion in 2009 when the book was published. That amounted to about $55,700 of debt for each taxpayer in the United States.

By March 2016, the national debt has swelled to more than $19 trillion (and rising by $1 million every minute!) which equates to $154,200 of debt for each taxpayer.

Yet this is a mere drop in the proverbial bucket compared to what the government will owe in benefits to Social Security and Medicare recip­ients far into the future, as well as in pensions to military and civilian government workers. The National Center for Policy Analysis estimated the total unfunded liabil­ities at $84 trillion[1].

Income taxes continue to increase. The Patient Protection and Affordable Care Act of 2010 (ACA), also known as Obamacare, was filled with new taxes that were expected to bring in $480 billion in new revenue as the taxes were phased in. The American Taxpayer Relief Act of 2012 added still more taxes and a new tax bracket. The new taxes were expected to raise another $70 billion in revenue for the government. Even after these tax increases the Congres­sional Budget Office predicted the federal deficit would top $590 billion in fiscal year 2016.

The government is going to need revenue. They see a huge number of untaxed assets—$24.2 trillion[2], to be exact—stashed away in IRAs and retirement programs.  Our elected officials have been making proposals from capping the amount that can be saved in retirement accounts to taxing amounts in retirement accounts if they exceed a certain threshold. Means testing is already taking place with Medicare premiums.

Anyone who has done a good job saving for their retirement on their own should consider the chance that Social Security benefits will be means tested in the future. A likely method of means testing would be to adopt the one currently being used for Medicare Premiums. If your income is higher than a certain threshold, your benefits will be reduced.

This may not seem fair, but we have little control over it. What each of us does have control over is taking the right steps toward protecting retirement assets from higher taxation. That is why the New Three-Legged Stool™ strategy is even more important than ever.

The book has been updated and retitled by the new publisher, Career Press. I’m pleased to announce Don’t Retire Broke: An Indis­putable Guide to Tax-Efficient Retirement Planning and Financial Freedom is now available in hardcover. A softcover addition will be available in early 2017. The hardcover version can be ordered online at DontRe​tire​Broke​.net. The new book updates all the strategies from the 2009 edition with the tax law changes that have evolved over the past seven years.

A new chapter has been added to address the huge impact of ACA on retirement planning. The book explains how to avoid or minimize the new taxes created in this massive legislation.

The ACA has made it more affordable to take early retirement. The book has helpful tips for you if you plan to retire before age 65.

The ACA also made important changes to how much seniors must pay for Medicare Part B and Part D. Don’t Retire Broke will show you how the New Three-Legged Stool™ strategy can help structure your income to minimize premium payments.

The Consol­i­dated Appro­pri­a­tions Act of 2016 finally made qualified chari­table distri­b­u­tions (QCDs) permanent. QCDs can be a very important tax saving tool for seniors over age 70 ½ who are chari­table. The book explains how the QCD can be used to reduce taxation on Social Security and avoid means testing that could raise Medicare premiums.

Don’t Retire Broke picks up on the three retirement planning strategies first outlined in The New Three-Legged Stool. These are the strategies everyone needs to use properly if they want to retire in a lower tax bracket.

  • Tax-Deferred Savings Strategies
  • After-Tax Savings Strategies
  • Tax-Free Savings Strategies

The new book is dedicated to exploring each of these three critical topics in detail, so the reader can enter retirement with a balanced Three-Legged Stool.

Rick’s Tips:

  • The national debt has nearly doubled since The New Three-Legged Stool was published in 2009.
  • Two major pieces of tax legis­lation have been enacted in the last six years which combined were expected to have raised taxes by more than $550 billion.
  • The new book Don’t Retire Broke is an updated version of The New Three-Legged Stool.

[1] How Much Does the Federal Government Owe? National Center for Policy Analysis, June 2012

[2] Investment Company Institute, December 17, 2014.