Big Questions Remain about Your Retirement Security and Tax Reform

Your Retirement is Not Yet Safe from Tax Reform

Fulcrum Partners Executive Benefits News

Big Questions Remain about Your Retirement Security and Tax Reform

Millions of working or recently retired Americans who have chosen to defer income for their retirement could take a serious hit to their financial security from the proposed tax reform bill, known as the Tax Cut and Jobs Act.

As initially presented, proposed tax changes would have dismantled nonqualified deferred compensation. In so doing, the changes would have placed a debilitating financial burden on many workers and soon-to-be retirees. The House of Representatives approved a tax reform bill, in a vote of 227 to 205, and the Senate Finance Committee both approved its version of tax reform on Thursday, November 15, that retains deferred compensation. But the matter is far from finalized.

Speak Out About Tax Reform

Given that you work a lifetime striving for a secure and comfortable retirement, you’ll want to stay on top of this issue as it continues to be debated by the full Senate.

If you are concerned about the security of your retirement, contact your U.S. Senators. Express your disapproval of changes to deferred compensation that make it more difficult for you to save for retirement while concurrently making it harder for American businesses to compete for talent in the global marketplace. This link, (aalu.quorum.us/campaign/5617) provided by AALU (Association for Advanced Life Underwriting), makes it easy for you to email or call your U.S. Senator.

We’re also providing you additional links to relevant updates about the Tax Cuts and Jobs Act, along with this heartfelt personal letter written by one of our clients.

Dear Fulcrum Partners

… I have outlined my situation regarding my NQDC where funds began distribution when I retired in June 2017 after 34 years as a sales representative for my employer. I elected to have these funds distributed over 15 years. 

I don’t believe that the Members (of the House and Senate) truly understand how financially devastating acceleration of distributions would be for older workers or newly retired, who, like me, have a significant amount of their retirement money in this plan and had assumed that those funds would be available to meet the needs of expenses in retirement over a 15-year period.

If this bill goes through, the money in this plan, which is substantial, would probably be distributed in a lump sum by my former employer, putting me in the highest tax bracket for both Federal and California state taxes. This would reduce my assets significantly, making it impossible to meet my retirement expenses.

This change could be financially devastating for many newly retired and older current employees nearing retirement. I appreciate your efforts on helping to communicate the negative impact, including my example, during the amendment process.

Thank you so much for your advocacy on behalf of me, other Fulcrum Partners clients, and many hardworking people striving for a secure retirement.

 

Resources:

Tax Reform Still Putting Your Retirement at Risk by Changing Deferred Compensation
Tax Cuts and Jobs Act US Congress

photo credit: Nathália Bariani