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When Tax Law Is Written in Pencil · How to Retire on Time

• 0:00
  Mike: Hi. Mike Decker, author of the book How to Retire on Time. Here's a question I was recently asked on my Retire on Time q and a. Check it out.
• 0:12
  David: First question that has come in, what should we what should we be looking for as tax planning tools during the rest of the Trump administration?
• 0:21
  Mike: So the current tax brackets are set in perpetuity. What that means is they're not gonna change until another politician comes in and changes them. So we need legislation to change tax law.
• 0:34
  David: Okay. So the tax law as it's set up now, it's it's locked in until someone else says, let's change it. And and we don't expect that to happen, I guess, in the next couple of years.
• 0:43
  Mike: Well, when Trump's gone Uh-huh. Assuming then he's gone. Yeah. He keeps teasing this third term thing. I I don't think that will happen, but but whether it's, you know, whatever party, and I don't...
• 0:57
  A lot of people like to point fingers of, oh, well that party raises taxes, that party does this or that. I don't really know if that's a safe or appropriate way to go about things, because anything can happen.
• 1:08
  David: Mhmm.
• 1:09
  Mike: But the point being is the tax law is written in pencil. Mhmm. That means it can change. So you want to, in my opinion, look at effective tax rates as kind of your long term benchmark, and then take of... Take the current rates, and then make subtle adjustments along the way.
• 1:28
  That's that's long term tax planning.
• 1:30
  David: Mhmm.
• 1:30
  Mike: The reality is, if you want to pay the government the least amount of money possible, you... And please don't do this. Please don't do this. You do everything as an IRA to Roth conversion, and you're done.
• 1:44
  David: And so you would do that now because tax rates are low right now?
• 1:48
  Mike: No. Because you give the lowest dollar amount to the government.
• 1:52
  David: Oh, okay. Right.
• 1:53
  Mike: But it's not in your best interest, because if you, just think about it, if you slowly maintain a lower effective tax rate for life Mhmm. More dollars will go to the government, but you also keep more of your money. So you're kind of aligned of self interest in that standpoint. And a lot of people don't realize this because they don't run the tax numbers. They just say, I'm gonna max out the bracket.
• 2:17
  I'm gonna get to a point here, and this is... I do this in the workshop. This is an actual one of our case studies. We talk about the person that did max out the 24% bracket, and they actually run out of money compared to the person that maintained a certain bracket for life. So you have to be very careful about these things.
• 2:33
  You have to have long term tax planning ideas, strategies to kind of do this the right way. Because when someone says, I wanna pay the government the least amount of money possible. I I want to ask, I don't ask. At what cost? Yeah.
• 2:46
  Do you hate the government that much that you're willing to hurt yourself to give the government less dollars? Yeah. And this is not a commonly understood concept, but it's just math. Mhmm. So a few things to note though is the one big beautiful bill act did have a few sunsets, like the the senior deduction, the additional deduction.
• 3:07
  Oh. So if you're married filing jointly a 150,000 or less from a modified adjusted gross income, like there's additional deductions with that. So you might have a little bit lighter tax planning until those sunset, and then more aggressive later on. You might wanna just plow through it and just say forget it. It's not worth it for my situation.
• 3:26
  Everyone is different, but there are a few sunsetting tax benefits. But again, you don't wanna jump over dimes to pick up pennies. I wanna pause real quick and just say, if you're getting close to retirement, I wanna invite you to download my book, how to retire on time. It's free. Just go to retireontime.com, and you can download my book, get the audiobook, the workbook, and so much more, including six plus calculators to help you prepare to retire on time.
• 3:54
  Check it out. Retireontime.com. Alright. Let... Now let's get back to the show.