58 • RUBY, WILDING & SWANSBURG
Macro vs. Micro At this point in the book, you may be thinking, “Why hasn’t anyone d iscussed this with me before?” It’s the most common reaction I get fro m savers like you: Why is n’t anyone talki ng abo ut a long-game approach to taxes ? The answer is simple, and, once you understa nd it , you’ll find it much easier to plan for your taxes in retirement. The truth is, in my experience, the vast majority of American retirement advice is given through a micro tax lens. A micro tax lens examines how a savings decision will impact your t ax es in the short term—us ually in a given year. Whe n we save i n a tax- deferred account , w e receive a tax deduction for that year. There’s a micro benefit. If I put $6 ,000 into an IR A in 2020, my taxable income in 2020 went down by $ 6 ,000. Neat! If we evaluate my 2020 savings approach through a micro lens, I made a good decision: I lowered my 2020 taxes. But, the biggest mistake savers make when it comes to taxes in retirement is solely relying on a micro tax lens. Wh at y o u als o ne ed i s a macro tax le ns . A macro tax lens isn’t concerned solel y with short-ter m taxes . Its goal is to evaluate and minimize lifetime taxes in retirement. Viewed through a macro tax lens, my 20 20 sa vings approach (contributi ng $6,000 to my IRA) might not be not such a smart decision. After all, I’ve just spent this entire chapt er discussing why my taxes in retirement may not be lower than my taxes today. So, in this case, I may have increased my future taxes—and future legislative risk—by contribut ing to a t ax- deferred account .
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