Tax Strategy Ending 2009
Through my blogs, emails and personal discussions, I have explained that the Bush Tax cuts will end December 31, 2010. Under the sunset provisions imposed by Congress, the tax rates will revert back to pre-Bush. These earned income rates were all 5 percent higher than now. In addition, rates for dividend and capital gains will move from the present 15 percent up to 28 percent.
It is evident to everyone that with the huge budget deficits, the new trillion dollar stimulus package, cap and trade and health care revision that tax rates will have to go even higher. Experts in the area estimate that middle Americans will be at rates of 55-60 percent very soon.
With this in mind, I have extolled the virtues of taking monies from all your qualified plans now at lower rates. Why wait until later when your tax rates can be almost double? Get your money out now and place it into something that will grow tax free, you can have access to it tax free and when you die, it transfers tax free.
The least expensive way to take your money out is through a Strategic Roll Out (SRO).
The purpose of my letter is to remind you to make this year’s withdrawal now from your IRA/401k. You want to pull out money now (even without a SRO) in 2009 up to a level that will not throw you in a higher tax bracket. Then, do the same thing in early 2010. Do not try to double up in 2010, for that will move you into a higher bracket. Make your move early in 2010 as many investors will begin selling their stock market gains early in 2010 to take advantage of lower rates. I want you to get out the maximum amount before the markets turn down due to 2010 tax selling.
If you are on track with your tax planning fine, but, please pass these thoughts on to your family and friends.