President Trump has promised to lower taxes for individuals and businesses. In addition, he has talked about repealing the estate tax. All of these changes will have an impact on taxpayers, but they will also affect investors, especially those who are looking at retirement planning. This is how the Trump tax plan may effect your investments.

 

Retirement Accounts

Investors looking to put funds in retirement accounts may change their focus. In the past, an IRA was appealing because it was tax-deferred, which meant you didn’t have to pay taxes on the money until you received the payout when you would most likely be in a lower tax bracket. With reduced taxes now, an IRA may lose some of its appeal. Instead, the person may look at other retirement options which require you to pay taxes now.

 

For those taking contributions now, they would pay out less in taxes, which may make these accounts more beneficial. Roth IRAs would possibly gain in popularity since you would pay lower taxes now on the amount you put into the account. If it is opened for at least five years, you would be able to receive the benefits without taxation.

 

A side benefit for a Roth IRA is that it wouldn’t be taxed if it passed on to the heirs because of the end of the estate tax. This means family members would get the full amount of any Roth IRA accounts instead of paying a large portion in estate taxes and losing out on the benefits.

 

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How to Consider Investments with a Trump Tax Plan

Since part of Trump’s plan is to reduce taxes for all individuals, a person must look beyond the tax benefits of today for investments. It’s still important to take full advantage of any employer-matching 401k plans. You want to put as much as possible into your investment portfolio to give it time to grow.

 

It’s also still a good idea to take advantage of programs that offer tax deferrals and deductions to maximize your investment. Since tax rates continue to change and evolve, tax deferrals will be beneficial for the long-term even if they don’t impact your bottom line as much today.

 

If you’ve written off Roth IRAs in the past, you may want to review them again after Trump’s tax plan goes into effect. If tax rates go up in 20 years, you’ll have benefited from paying on your investments on the front side. On the other hand, if you choose a traditional IRA account, realize you may end up paying a higher tax when you retire than what you save now with a lower tax rate.

 

Work with an experienced investment advisor and let them know your future goals as well as your current tax and income information. Let them help advise you on your best options. At the same, remember that you must make the decisions that are right for you and your family today and for your future as you consider all aspects of investing and taxation.

 

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