If you were going to retire to a beautiful island, which one would you choose?
Aruba is a beautiful country. Beautiful weather. Beautiful beaches.
…But not so beautiful on the tax side of things.
In America, we use progressive taxation. This method taxes individuals based on their earnings – low-income earners are taxed at a lower rate than high-income earners.
In Aruba, the marginal income tax rate is the tax rate applied to the last dollar you earn. According to Global Finance, Aruba had the highest marginal income tax rate in the world! If you lived there, the marginal income tax rate would be as high as 52 percent, according to the latest data available from this year!
Alternatively, you could move to Guatemala to reduce your top marginal rate to just 7 percent.
The United States’ progressive tax system has the top earners paying the greatest marginal tax rate. Therefore, they also pay the bulk of the income taxes.
In 1980, the top 10 percent of wage earners in the United States paid almost 50 percent of the total tax bill. One half of the income tax burden was shelled out by 1 out of 10 income earners.
Maybe that’s you!
Today the top 10 percent of wage earners pay about 70 percent of the tax bill.
According to data from the Tax Policy Center from the 2015 tax year, 45.3 percent of American households paid zero federal individual income tax.
No one knows for sure where tax rates are heading. If you’re like most, you feel pretty certain that you’ll continue footing most of the tax bill.
That is why it is important to understand how taxes work when it comes to your retirement capital – it is likely subject to more than just income taxes.
Your retirement capital can be taxed up to three times – income taxes, capital gains taxes, and estate taxes!
One of our favorite sayings is “you can make more money by saving taxes than you can by making more money.”
Saving taxes requires PROACTIVE planning. There are over 72,530 pages of IRS tax code, filled with opportunities to save taxes. If you haven’t taken the time to see if your tax burden can be lowered, work with us, and DO IT NOW!
Our Tax Opportunity Conversation is a quick and easy way to see if you have missed any opportunities.
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