Americans are starting to see the impact of increasing prices at the supermarket, and the start of increased inflation and taxes. Also, clothing at retail stores is depleting as manufacturing has halted, creating demand for products ordinarily accessible.
Today’s economic conditions are much worse than coming out of the Great Depression. During periods of economic recovery, the U.S. experienced historical debt and tax levels, paid for by the American people when tax rates were above 40% for over 40 years (1940-1981). Many older Americans recall the high-interest rates, high prices, and people displacing from the weak economy.
While the CARES Act provided a one-time payment to individuals and for business stimulus, it will not solve our country’s future economic problems. In addition to government-funded recovery will likely lead to higher taxes, and the debt will be collected from U.S. taxpayers to decrease the Federal deficit.
What has changed since The Great Depression is the debt the U.S. carries, now close to $24.2 Trillion with a 106% Debt/GDP Ratio (Gross Domestic Product). Our debt to GDP ratio indicates that the U.S. owes more than it produces and consumes domestically, or exports. How do economies recover? By producing and selling more than its expenditures or by raising the prices of their products. How do government coffers improve? Through tax collection. Both create problems for everyone, but especially for those nearing or in retirement.
In any market, investors must always consider the five risks that can sideline their financial future:
One solution to addressing inflation risk and tax risk is by increasing the allocation of principal-protected products. In addition to the benefits of fixed-indexed annuity products address all five significant dangers:
In addition, the impacts of inflation and taxes due to COVID-19 will continue making it critical that you consider your retirement portfolio’s allocation and prepare for your financial future. If you are nearing retirement, make sure you prepare for higher taxes and discuss tax-saving strategies at our next meeting.
Disclosure: Guarantees are backed by the financial strength and claims-paying ability of the issuing company. This article is designed to provide general information on the subjects covered. Pursuant to IRS Circular 230, it is not intended to provide specific legal or tax advice and cannot be used to avoid penalties or to promote, market, or recommend any tax plan or arrangement. You are encouraged to consult your personal tax advisor or attorney.
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