My predictions for the future are: first, ALL Social Security income received will be taxed. Next, since the system cannot accommodate all the Baby Boomers who are either currently receiving Social Security or are about to, the current threshold of income that is subjected to FICA from current workers will increase. Next, the retirement age at which someone can receive Social Security will increase, as they have recently proposed in France. Then, there will be a means test. If one does not“ need” Social Security [ by having too high a net worth or other income as determined by Congress ], the potential recipient will not receive it.
Next up on my list of predictions has to do with ROTH IRAs. For some time, many taxpayers have had the option of having a ROTH IRA instead of a traditional IRA. The plan was to pay taxes now and get it over with. The ROTH IRA would be allowed to grow without taxation as well as when the recipient withdrew money from the ROTH IRA [ no penalties if the owner is over 59 ½ ]; however, ROTH IRAs have grown tremendously in recent years, as many taxpayers believed tax rates would
increase and the thought was to pay the taxes when tax rates were less. With ROTH IRAs becoming a large part of“ taxfree” growth, it is my belief that Congress will not just outright start taxing them, as this would fly in the face of what was originally proposed. The way that Congress will effectively get their tax revenue is to do what they did with Municipal Bonds as explained earlier; ROTH IRA income [ possibly even the value of the assets in the ROTH IRA ] may influence the taxability of other income. This would be a sly way of not directly taxing ROTH IRAs but be structured in such a way for the government to collect more taxes. This same strategy may also be applied to
other deferred income that is not currently being taxed such as single premium life insurance, whole and universal life insurance and some annuities.
I am not against ROTH IRAs, but my predictions have led me to believe that it is best to save taxes now [ traditional IRAs, 401( k) s, etc.] wherein the taxpayer saves money immediately, knowing there is a 100 % chance of no current tax. In addition, the taxes that are not currently paid can be invested and increase the taxpayer’ s net worth. As the saying goes, A Bird in the Hand …
MEET EDWARD BROWN
Edward Brown currently hosts two radio shows, The Best of Investing and Sports Econ 101. He is also in the Investor Relations department for Pacific Private Money, a private real estate lending company. Edward has published many articles in various financial magazines as well as been an expert on CNN, in addition to appearing as an expert witness and consultant in cases involving investments and analysis of financial statements and tax returns.
Edward Brown, Host The Best of Investing on KDOW AM1220 on Saturdays at noon.
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