THE NO-COMPROMISE RETIREMENT PLAN • 37
No. 2: You make more money. This is a good problem to have, but one that’s not terribly likely to occur once you’re retired. Today, you’re making $100,000 and paying at the 24 percent tax rate. Next year, you’re making $200,000 and paying at the 32 percent tax rate. You’re making more money, which is great. But you owe more of it to the gov- ernment as well. No. 3: Your deductions are eliminated. Most people can take a variety of tax deductions. For example, if you pay interest on your mortgage, it’s usually tax-deductible. But there’s a trend in Washington toward taking away those de- ductions. Put another way, you could have to pay taxes on a larger part of your income. Call it what you wish, but that’s a tax increase. Let’s say you make $80,000, but with deductions and credits your total taxable income becomes $72,000. If those deductions go away, you’ll essentially have $8,000 more on which you must now pay taxes. That means you could owe $2,000 extra in taxes. No. 4: The government taxes more things. This is another way the government could tax more of your in- come. Here’s a good example. You don’t pay Social Security taxes on every dollar you make. There’s a limit, called the “maximum taxable earnings.” In 2014, the Social Security taxable earnings cap was $117,000. That meant, if you made $90,000, you paid Social Security taxes on all of it, but if you made $120,000, you paid taxes only on the first $117,000. In that case, $3,000 would not be sub- ject to Social Security tax. Things changed in 2015, however. The maximum taxable earn- ings for Social Security increased to $118,500. So, if you earned $120,000 in 2015, you no longer avoided taxes on $3,000, only on
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