The word rich gets thrown around all the time but who actually falls into that category? It’s certainly subjective but the government’s definition by directly impact your future taxes. Let’s look at some statistics and get a better idea of how taxes are generated and who is actually paying them.
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Income inequality has gained a lot of attention in recent years and it’s now become a major discussion surrounding taxes. With the country looking for ways to fund a number of large proposals on top of the existing national debt, the concern about increased tax rates seems to be on the minds of many people.
On this episode of the podcast, we wanted to spend some time examining the definition of rich. Who falls into this category? There seems to be quite a disparity in income but that’s not always reflected in taxes.
So, who is the rich?
According to a survey by Charles Schwab, they defined wealthy as having $2.3 million in personal net worth. Another survey found that people thought earning $100,000 per year in salary would be considered rich. But as we talk about all the time, the amount of money you need is going to be different for every person so it’s difficult to define.
But consider someone with $1 million in savings. We says that person is facing the $40,000 dilemma. That’s how much you could pull out every year at a 4% withdrawal rate in retirement, but is that enough to cover your needs.
So the big question our country is considering right now is whether the truly wealthy our paying their fair share in taxes. To get into that top 1%, you need to earn about $500,000 per year, but there just isn’t enough people in that group to pay off national debt. That’s why lower earners often get lumped into tax increases. Don shares some interesting statistics on the show to
That’s why you need to be asking yourself these questions to determine what kind of action you should take in your retirement plan?
- Do you think tax rates are going up or down?
- Is a large portion of your savings in taxable accounts?
- Do you have a strategy to deal with this?
No matter what happens in the future, you need to be prepared for multiple scenarios. Regardless of administration, taxes will always be changing and that emphasizes the need for sound planning.
Listen to the entire episode or skip ahead using the timestamps below.
0:48 – Are we post-COVID?
2:37 – Clarifying comments from previous episode on New Jersey
5:02 – Who is the rich?
7:70 – $40,000 dilemma
8:48 – Issue of the wealthy not paying enough in taxes
10:33 – How much puts you in the top 1%
12:15 – Income tax rates
15:48 – Cash Connection question on long-term care policy rate increase
Resources Mentioned on the Show:
Russell Long – “Don’t Tax me, Don’t tax thee – https://en.wikipedia.org/wiki/Russell_B._Long
Who pays taxes and how much in America? – https://taxfoundation.org/publications/federal-tax-rates-and-tax-brackets/
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Phone: (732) 784-2867
Donald W. Cash – CPA, CFP® is an independent advisor. Don began his career in 1985 as an accountant after graduating Rutgers University. In 1990 he entered the field of Estate Planning with a concentration in long term care planning. Don has been advising clients in the baby boomer and retirement market for 20 years. He has helped over 1,000 families with their planning needs. He advocates a holistic approach to Estate and Financial Planning as has relationships with other professionals including Attorneys, CPA’s, Mortgage Specialists, Insurance Specialists and Asset Managers. Don is married to Cathy and have 4 children, Carly, DJ, Nick and Tori. They live in Freehold, NJ.