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Legislative Risk in Retirement

By Steve Gaito

McDowell Countysteve gaito Mcdowell county retirement resource management


Legislative risk is stress that everyone in or close to retirement feels. It is the threat that the government will do something that negatively impacts your retirement income. I know this because when I survey attendees of my seminars it is often one of the top three reasons they come to hear me talk. Why would the legislative risk be so high? I think you know why. There are over 30 trillion reasons. Our national debt has risen to an unprecedented level in the past couple of years. The government has a history of taxing what they consider to be wealthy. This definition varies depending on who it is targeted. For example, if you have a million dollars in a retirement account you are considered wealthy. But if you were to use the income safely generated from the account it would be generally between $35,000 and $50,000 which most would consider being middle class. This income if it were generated from a qualified account (IRA, 401(k), etc.) would be subject to income taxes and be added to the income from Social Security. This additional taxable income can increase the taxes you pay on your Social Security benefits. So, these distributions impact more taxes than most think. It is important to remember that the government controls the rules, and this is a Legislative Risk. They can change brackets, deductions, credits, exemptions, and how much of your Social Security benefit is taxed.

What if you could take this risk off the table for most of your income? Would that make sense? I believe so. For almost 30 years I have helped people save in these plans. The objective was to save in higher taxed years to withdraw in lower tax years. This has worked well for most, but that will soon change. In 2026 the tax tables and rates revert to old higher tax tables. There are two ways depending on your circumstances to get tax-free income. The simplest way is Roth conversions. I help people maximize the tax brackets to convert and pay taxes now at lower rates to be able to take money out later tax-free. This eliminates most of the legislative risk down the road. The challenge is that the government still controls the rules that govern Roth IRA plans and like in recent legislative proposals they had Roth IRAs included in required minimum distribution calculations. This effectively would have forced withdrawal from Roth accounts and had money now subject to capital gains taxes. You can see that the government is always looking for ways to get more of your money. The other way is by using, dare I say, Life Insurance. Life insurance has always been a great source of tax-free income for the wealthy, but with the introduction of Indexed Universal Life and Survivor Indexed Universal Life, it provides a very attractive alternative to a Roth IRA. You still must withdraw money from the qualified accounts, but once it is in the policy it becomes a great source of tax-free income and provides great estate benefits should you not need the income. Best of all because it is a contract between you and the insurance company it is not subject to the same legislative risk. The government may limit these in the future, but because they are individual contracts it would be difficult to legislate across the board.

If you would like to see an analysis of what each of these strategies looks like for you let me know. I am happy to schedule a free no obligation initial meeting. Contact my assistant Morgan Wylie at either or give her a call to schedule a time. (828) 559-0299


Steve is the owner of Faith-Based Health Care and Retirement Resource Management. He is a National Speaker on the topic of Social Security optimization, quoted in national publications like Money Magazine, US News and World Reports, and Fox Business. Steve loves to educate and teach on financial topics like taxation of retirement accounts, long term care, healthcare, and efficient savings plans for small businesses. He has provided financial planning for missionaries through the International Mission Board. You can find Steve at 68 South Main St. in Marion, NC by calling 828-559-0299, email or visit his website at

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