We talk a lot about people not doing tax planning and not spending more time creating the tax outcomes they want. We urge people to understand that it’s within their own control and that tax outcomes can be legally and ethically manipulated. We go on and on about the benefits. BUT…we understand why it’s so rarely done!
It is because almost nothing in people’s lives has more constant change than taxes, and keeping up with all the changes can be an overwhelming challenge. What if every four years your banking rules changed, “Oh I’m sorry John, we no longer pay you interest, now you pay us interest to keep money here.” Or “Now you have to send in your mortgage payment daily, not monthly.”?
We all have complex and often busy lives, so when the IRS changes at least a few of the rules every year (or sometimes even more frequently) it’s easy to understand why people seem to give up and just justify inaction with, “It’s over my head” and “They are going to get what they want from me one way or the other” type statements.
The problem is magnified because people don’t always visualize what the costs are to not paying more attention. If people have an adjustable rate mortgage then every time they get the statement they look to see what the increases or decreases are, plus the mortgage companies must by law do calculations for you and say “The interest rate change means you will pay $18,400.01 more over the life of this loan” and seeing such statements makes people react. The IRS doesn’t have such requirements so people have become disconnected. What if at work your paycheck stub said, “By not maxing out your 401(k) contribution, you will pay an additional $1,453.88 in taxes, and over the next 21 years that represents $31,890.00 retirement dollars you won’t have?”
People need to understand that not overpaying taxes is another potential form of retirement savings. It matters, and if they can’t understand the rules they can simply hire a tax planner that does. This isn’t a game. It’s the life you get and the retirement you get, and actions matter as well as INACTION!! Find a tax planner or get educated yourself; or get taken advantage of.
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