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Capital Access Planning - one dollar, multiple jobs.
Capital Access Planning (CAP) is an alternative to traditional financial planning. Unlike traditional financial planning, which reduces control and increases risk, CAP focuses on better cash flow control and more efficient risk management.
The following chart summarizes the benefits of CAP methods vs. traditional methods...
- How Traditional Financial Planning Could Increase Your Tax Rate.
Any discussion regarding your retirement savings must begin with taxes. For it is the subject of taxation that defines your ability to fund a comfortable retirement above all else. To begin this process of looking ahead, we must first look to the past. The following graph displays the highest marginal tax rates in U.S. history since 1913 - the year in which the IRS was founded.
From the chart above, we see that tax rates in the current environment are near their historic lows. Because tax rates tend to rise and fall together across brackets, we will use this chart as a measure of rates since the inception of the income tax in 1913.
Given current low levels of income taxation, is it reasonable to assume that tax rates will go significantly lower than current levels? With history as our lens, and looming federal budget tax increases as our guide, a conclusion can be reached that current investors are deferring taxes at a time when tax rates may be positioned to steadily climb.
In economic terms, a dollar earned today is more valuable than a dollar earned tomorrow. This is primarily because of the effects of taxes and inflation. Therefore, by extension, a dollar saved today is more valuable than a dollar saved tomorrow.
The economic reality of tax deferral is that future tax increases become virtually guaranteed, thus costing the investor more money at a time when tax free income is vital. That simple economic reality may be the best argument against a traditional defined contribution plan. Despite the continued perception that savers will be in a lower bracket upon retirement, overall tax brackets are likely to be higher in the future. |
