With all of the recent bailouts of investment firms, mortgage brokers (Bear Sterns, Fannie Mae, Freddie Mac), and other financial institutions, as well as the economic stimulus rebate checks and talks of a second one, at some point it will have to be paid back in some fashion. Whether or not inflation continues to remain high, at some point the government will likely stop printing more money to cover everything, and will look to get that money back from someone, probably John Q. Public. While it is not guaranteed that taxes will go up in the future, it really seems like the odds are in favor of higher taxes somewhere on the horizon.
If that assumption seems reasonable to you, lowering your taxable income in the future as well as diversifying the tax treatment of your future income streams, like retirement savings, seems like a good thing to do. Fortunately, there is already a vehicle in place that will allow tax-free withdrawals of income needed at retirement age, the Roth IRA. If you haven’t opened a Roth IRA yet (which I have not), now is a good time to start thinking about it and putting it on the “to do” list. I have it as #2 on my financial planning list, right after eliminating credit card debt. I am putting in the amount required to get my 401k match from my employer, but the Roth IRA will be opened before I increase contributions to my 401k.
I guess you could say I am guessing that my taxes will be higher in the future, but to me, all signs seem to point to that being a strong possibility.
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Double 08.14.08 at 9:07 am
It is certain that the government bailouts and payouts will mean higher taxes are coming. There will also be need for cutbacks in government spending as the U.S. cannot continue massive financial deficits without cutting spending and raising taxes.
RC 08.14.08 at 11:39 pm
Double- Unfortunately, I think you are correct. I do think cutbacks will be a good thing-although they do hurt certain people. But I am definitely in favor of cutting back on government spending.
Andys 08.15.08 at 11:41 am
Higher taxes and more bailouts are definetly on the way. All I can say is make sure you have a globally diversified portfolio to protect yourself from US specifc issues (national debt, long term falling dollar etc).
RC 08.16.08 at 8:47 am
Andy- You may be right- I think diversification (including globally) is always a good idea!