THE NEW HOLISTIC RETIREMENT • 55
Legislative Risk I hope you’ll star t thinking about the legis lative ris k you carr y in your retirement strategy. I mentioned previously that my early career was spent in Washingto n, D.C., worki ng for members of Congress. If there’s one t hing I lea rned in t he hallow ed hall s of our nation’s Capitol building , it’s that Congr ess can always change the rules. When you save in an IR A or 401(k), your savings are ex posed t o legislat ive risk . Legislat ive risk is t he risk that Cong ress ma y change tax law in t he fut ure, and t hose changes can eit her positively or negatively impact the amount of retirement funds you ge t to ke e p. Qualified accounts—like the IRAs and 401(k)s most of us us e to save—are particular ly susceptible to legislative ris k. That ’s because, in t hese account s, you defer your tax es t o t he future. That means every tax law change between now and the day you take your last retirement distribution can impact your savings. Wh at if Cong ress pa sses a bill raising tax rates? I f t he President signs it int o law , suddenl y you have t o pay t he IRS more and have less money to spend in retirement. If a few years late r Cong ress changes your bracket again, you woul d agai n be helpless agains t the extra expense . Sur e, it’s possible th at Congress wi ll decrease rates , but historically whe n this happens, it comes with a sunset period and the low taxes are short-lived—hardl y something to rely on. It’s of ten said, when it comes to retirement, the tax code is written in pencil. For many of us, retirement will be twenty or thirty years. It ’s impossible to thi nk tax law wi ll stay the same over such a long period. And, if you look at hist ory, it hasn't .
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