In the plans I run I include a 25% increase in Federal Taxes in 2009 and a 25% decrease in Social Security benefits in 2009. These assumptions make the plans conservative but I think it is important to reflect changes in these two areas. I am curious to learn what others may be using as assumptions for future taxes and Social Security benefits.
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RSS
I'm assuming a 25% increase in Federal taxes in 2011 because I think Congress will be forced to raise taxes and that's the earliest I'm guessing they can push through an increase. Note, that ESPlanner's tax calculations for 2011 ( or is it 2010) already assume that the Bush tax cuts will NOT be extended. So, a 25% increase in the amount of Federal taxes you pay is on top of any increases ESPlanner calculates assuming the Bush tax cuts are not extended. Has anyone evaluated the change in tax brackets needed to extract an additional 25% from our depleted wallets? Maybe assuming a 25% tax increase is way to conservative.
Can someone clarify which tax year is impacted if the Bush tax cuts are not extended? Is it 2010 and it affects the taxes that are due in April of 2011?
I've also assumed a 25% decrease in SS Benefits beginning in 2010 & a State tax increase of 25% in 2010. I hope I'm being conservative and not optimistic.
James
From Wikipedia:
http://en.wikipedia.org/wiki/Economic_Growth_and_Tax_Relief_Reconciliation_Act_of_2001
according to this, the Bush tax cuts sunset Jan 1, 2011 which means that the first tax year affected is 2011.
Best,
Dick Munroe
I'm assuming 15% decrease in SS benefits and 15% increase in taxes.
FYI, I have done some exhaustive "sensitivity" studies (altering one single variable at a time over a range of values to see how sensitive my plan is to changes), and, for me, the 15% decrease in SS has a much greater effect (an order of magnitude) on my recommended consumption than the 15% increase in taxes.
YMMV.