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For those preparing for retirement, no more income taxes could be largely beneficial for their investments and income.
However, not all changes will be automatically positive.
Heres how the elimination of income taxes could affect you andwhy you might want to change your retirement plans.
If Trump eliminates income taxes, theres a good chance that thecost of livingwill become higher in other ways.
In states with no income tax, the combined sales tax tends to be higher.
Theres a good chance costs are only going to continue to rise possibly faster than they already do.
Sales tax isnt the only thing to watch out for.
If income taxes are cut from the equation, property taxes could also potentially rise.
Tariffs are essentially a tax levied on imported goods so that domestic items are competitively priced.
Theyre designed to increase the cost of foreign-made items.
Any tariffs are paid to theU.S.
governmentprior to these foreign items being imported.
This largely depends on the individualsassets and income bracket.
But if you anticipate having other income sources, up to 85% of your benefits could be taxable.
Eliminatingfederal income taxescould save you money there and open up some greater cash flow in retirement.
Take the traditional IRA as an example.
This lowers your personal income taxes for the year.
The trade-off is that youll need to pay taxes when you start drawing from that account in retirement.
If income taxes are eliminated, you wont get thesame initial benefitby contributing to a traditional IRA.
Employers could also change their retirement benefits based on new tax laws, which could impact your retirement planning.
Other types of tax-advantaged accounts, likeRoth IRAs, could also be impacted by Trumps proposal.
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