Risk: Tax Increases
From: Simplicity Group
Many Americans will owe taxes on their retirement income withdrawals. This can equate to 15, 20, or even 30 years of future tax liabilities while one is no longer earning an income. The retirement risk in this scenario is tax increases. If taxes go up, there is a likelihood that so will your tax bill. This means less money for the things you need and want in retirement.
In the U.S., we have seen a correlation between debt to Gross Domestic Product (GDP) as a leading indicator of tax increases. The chart below illustrates how the highest marginal tax income rate trends with the debt-to-GDP ratio. Today, our debt is reaching unprecedented levels, therefore many anticipate U.S. tax rates will also increase in the near future.
