The National Debt, Taxes and How to Prepare Your Client

Taxes are inevitable. And, given the increase in the national debt, a rise in taxes also seems inevitable. As a financial advisor, your concern is what this means for your clients and their plans.

There are a lot of different things going on in Congress and we have a new administration in the White House. All indicators so far point to those earning $400,000 or more being the most affected.  But we also need to consider Social Security and capital gains.

What it means is that tax-deferred assets and tax-deferred savings like annuities will be very beneficial in the future. If you think about what we are looking at in terms of the growth of the national debt over the next 30 years, it is very likely that the increase in taxes will not be just short-term. Instead, it will be a more sustained increase in the need for tax revenue.

 And when having discussions with your clients, it means that you need to change your words. Don’t just talk about the nominal interest rate. Discuss the actual real rate of return. The real rate of return takes into consideration the impact of the actual rate of return, the increase in taxes, and the impact of inflation. And we’ve seen a little bit of inflation rear its ugly head when you compare annuities with many other alternatives, like certificates of deposits.

Annuities have a substantially higher real rate of return that will help your clients on an after-tax and after-inflation basis, allowing them to be able to buy the same things that they can today and well into their retirement. So, look at tax-deferred assets like fixed and indexed annuities. Your clients will be very open, given the consideration of where we’re headed with the national debt.

Call your retirement income consultant at (800) 589-3000. Sit down and talk with them about how tax-deferred assets can make a huge difference in the probability of success in your client’s retirement plans.

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Fixed and indexed annuities are effective planning tools against rising taxes and inflation.

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