How To Protect Your Retirement Plan from Higher Taxes

By Admin Prepare

May 4, 2021

The news has been dominated lately with talk about the future of taxes and tax rates in this country. Tax rates are expected to rise not only for individual income taxes but also for capital gains and corporate taxes. In addition, several new taxes are being proposed, and the estate tax exemption amount will likely be coming down to affect more people. So how can you protect your retirement plan from higher taxes in the future?

The Biden administration has repeatedly said that taxes would not be raised on those earning less than $400,000 a year. However, President Biden also said he wants to repeal the Tax Cuts and Jobs Act of 2017 which would lower the standard deduction and revert tax brackets back to higher levels. The new administration has also proposed changes to capital gains tax rates as well as a series of new taxes that could affect everyone.

There has been discussion about eliminating the valuable step-up in basis at death, which allows people to avoid paying tax on certain appreciated assets that are inherited. There are some proposals that would eliminate the step-up at death. And there’s talk of lowering the estate tax exemption from $11.98 million per person to $3.5 million and lowering the gift tax exemption to $1 million.

All of these proposals could warrant some significant changes regarding how you should save for retirement and how you should allocate investments. Also, it may be time to look into taking profits on deferred gains in appreciated assets in order to get the tax paid at lower capital gains rates. In addition, it may behoove you to start paying taxes on tax-deferred money now and get those dollars moved into tax-free vehicles for the future.

Bottom line is that there are a lot of gray areas yet to be defined. We do know that tax rates will be going up for at least some people, and new taxes will be implemented. We just don’t know the specifics yet, what changes will happen to itemized deductions and phase-outs, and what other tax law changes will occur. So, now is the time to start preparing and protecting yourself from higher taxes. How do you do this? Visit the Prepare Institute website ( and find a retirement course or class near you.

Content is for educational and informational purposes only. It is not intended to be used as the sole basis for financial decisions, nor should it be construed as advice designed to meet the particular needs of an individual’s situation. You should contact your retirement and tax professional before utilizing any of the information in this article.