Speaker | Author | Thought Leader
Tax & Legislative Risk
What is Tax & Legislative Risk...
And Why Should Savers Care?
Becky has educated thousands of savers and their advisors on the importance of mitigating Tax & Legislative Risk in retirement. So what are these important risks - and how can they impact Americans?
These two risks are closely interconnected and form what may be the largest, least-understood risk facing American savers today.
Tax Risk is the risk that a person’s taxes are higher in retirement than planned. This means more of a retiree’s income is going to the IRS as taxes, and less of the income is staying with the retiree to spend on living expenses.
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Tax Risk measures the level of taxation a saver experiences in retirement.
We're about to see a good example of tax risk. In 2025, several provisions from the 2017 Federal Tax Reform (“Trump Tax Cuts”) expire. This includes the reduction in individual income tax bracket rates. So in 2026, many savers will find their tax bracket rates are higher than they are today, causing them to pay more in taxes even while maintaining the same amount of income.
These two risks are closely interconnected and form what may be the largest, least-understood risk facing American savers today.
Legislative Risk is the risk that Congress changes the rules, and those changes negatively impact a saver’s retirement approach.
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Legislative Risk measures the structure of taxation a saver experiences in retirement. While Tax Risk is concerned with the level of taxation through tax brackets, Legislative Risk is concerned with what is taxed, when it is taxed, and for whom it is taxed.
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We just experienced a good example of legislative risk in 2019. In the Secure Act, Congress included a provision eliminating the Stretch IRA for most Americans, dramatically changing the rules around inherited IRAs. This change impacted when inherited IRAs are taxed, potentially upending strategies IRA owners had put in place for their heirs.
Becky has educated thousands of savers and their advisors on the importance of mitigating Tax & Legislative Risk in retirement. So what are these important risks - and how can they impact Americans?
Together, Tax & Legislative Risk impact a saver’s total tax burden in retirement and beyond.
But too many Americans are ill equipped to address these risks in retirement.
While many Americans understand the importance of diversification when it comes to the stock market and even income sources, the majority of Americans are not adequately diversified when it comes to the tax status of their retirement accounts.
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This has created significant exposure to tax and legislative risk. Coupled with a rising federal debt and elected leaders who spend federal funds freely, this has created an environment where savers must protect themselves from Tax & Legislative Risk in retirement.