For years you have dedicated your life to Lockheed Martin and saved thoughtfully to your 401(k) plan so that in retirement, your pension and 401(k) can provide you the life you desire. But have you considered what can happen to your lifestyle as taxes and inflation rise? If not, then this is the blog you need to read.
FIRST, WHAT IS INFLATION?
The Oxford Dictionary defines inflation in economics as a general increase in prices and fall in the purchasing value of money. Inflation can occur when prices rise due to increases in production costs, such as raw materials and wages. A surge in demand for products and services can also cause inflation as consumers are willing to pay more for the product.
SECOND, WE ALL KNOW WHAT TAXES ARE…
What we don’t know is what the tax rates will be in the future. If we’ve learned anything from history, we see that tax rates have varied from administration to administration with the highest marginal tax bracket in history being 94% during the Second World War and as low as 1% a few times in the first quarter of the 20th Century.
It’s important to consider both of these and how they will affect your future retirement income. As people approach retirement and eventually retire, they tend to become more conservative with their investment selections. As a rule of thumb, this makes good sense. However, it is important not to become too conservative too early.
This chart illustrates how inflation and income taxes can impact investment returns and purchasing power:
As you can see in the example above, the reduction in taxes and the adjustment of inflation almost negated all the earnings from the investment. Planning how you are investing your retirement dollars is something that needs careful consideration and involving a professional in the process can greatly enhance your knowledge of what avenues to take and which to avoid.
If you don’t have a financial planner to assist you and would like further information and direction, we’d be happy to speak with you. Give us a call today at 817-210-3444 or click HERE to book a complimentary consultation with one of our Lockheed Martin specialists who can review your situation and help you continue to plan for retirement.
WANT MORE LOCKHEED MARTIN INFORMATION?
Want to get better educated on Lockheed Martin retirement strategies? Then download our free report, Retire with Confidence: Top 4 Things You Can Do to Maximize your Lockheed Retirement.
Be sure and check back next week for more valuable Lockheed Martin information. Cheers!