Recently the White House announced President Joe Biden’s “American Families Plan.” Within this proposed bill is a substantial increase to the top federal tax rate on long-term capital gains and qualified dividends.
In the proposal, the rate would increase from 23.8 percent to 39.6 percent for high income earners. When including the net investment income tax, the top federal rate on capital gains would be 43.4 percent.
Wealthy people are more likely to be investors than poor people and many believe that the current capital gains tax rates are tax breaks for the wealthy.
In today’s political economy, many are calling for the wealthy to pick-up a larger share of the tax burden and this may be a way to level the playing field.
These changes, if enacted, will make it more difficult to retire comfortably. The challenge, as always, is planning during a time of uncertainty.
Nevertheless, we can be certain of two things:
- The national debt is climbing.
- The government will be looking for ways to increase revenue.
In other words, Biden’s proposed tax increase will likely make tax-deferred accumulation tools more attractive to the high-income earners.
Most advisors traditionally look towards IRAs or deferred annuities; however, cash value life insurance may be a more powerful solution thanks to the tax benefits of life insurance and the recent MEC limit increase allowing the insured to put more money into a policy.
Ultimately, this is life insurance and if an unexpected death were to happen during the accumulation phase the death benefit would be treated as a self-completing retirement plan for the family. Cash value life insurance is looking more and more attractive!
Please call one of our life insurance experts to discuss in greater detail, we are here to help!